Coal Seam Gas

[Huang Chung]

A very interesting interview with Ivor Rees, EL & C Baillieu's Research Director, on Inside Business this morning. Ivor used to be a commentator with the Financial Review or the Australian (can't remmeber which) several years ago.

Transcript attached below.

http://www.abc.net.au/insidebusiness/content/2007/s2234709.htm

Bermuda, I'm sure you'll luv it. :)

[tricha]

Bermuda - "Just been researching the Chinese oil supply situation. They are forward thinkers and have some big and varied contracts. Good old USA had better pull their socks up.

Also had a look at the LNG tanker fleet. 245 tankers as at March 2007 with another 145 on order. That says it all. Gas prices are in for a huge lift.

VPE well poised in all this. See you on the 17th."

There you go Huang you are onto it and still have a chance to get into some good CSG or two before she BLOWS. ;)

Be like bees around a honey pot, far out another 145 LNG tankers on order.!

[AMR]

Now the inevitable question...does anyone know where I can find a chart of Australian gas prices? (or futures)

[Huang Chung]

Bermuda - "Just been researching the Chinese oil supply situation. They are forward thinkers and have some big and varied contracts. Good old USA had better pull their socks up.

Also had a look at the LNG tanker fleet. 245 tankers as at March 2007 with another 145 on order. That says it all. Gas prices are in for a huge lift.

VPE well poised in all this. See you on the 17th."

There you go Huang you are onto it and still have a chance to get into some good CSG or two before she BLOWS. ;)

Be like bees around a honey pot, far out another 145 LNG tankers on order.!

Yes T, it does look good....but I can't be in everything that looks good out there, as might as I would like to. :mad:

I watched the program, and I distinctly remember saying 'wow' at one point, so I thought you methane maestros would appreciate the read.

[kura]

Now the inevitable question...does anyone know where I can find a chart of Australian gas prices? (or futures)

I doubt if that is what you want to be looking at as domestic gas prices in Oz are "awfully low" converting the stuff into LNG & exporting is where the money is !

Considering NZ is running out of the stuff (Maui) we may be also importing LNG before too long.

However it isn't a cheap exercise building the necessary infrastructure, maybe look as OSH annual report, on their proposed PNG gas project, it wasn't that many years ago their PNG gas was considered pretty much "worthless"

[bermuda]

Yes T, it does look good....but I can't be in everything that looks good out there, as might as I would like to. :mad:

I watched the program, and I distinctly remember saying 'wow' at one point, so I thought you methane maestros would appreciate the read.

Thanks Huang Chung. The more this gets exposed the more people will begin to understand just what is going to happen to the Queensland CSG market.

And the analysts still havent picked up on the big ( Petronet ) India interest.

International markets at International prices via a bigger and bigger LNG fleet. And the carbon footprint is a lot lot less than coal.

Holding BOW RPM VPE and VPEO...all with links to majors with the know how and capital to get it to Gladstone and exported as LNG.

[bermuda]

Thanks Huang Chung. The more this gets exposed the more people will begin to understand just what is going to happen to the Queensland CSG market.

And the analysts still havent picked up on the big ( Petronet ) India interest.

International markets at International prices via a bigger and bigger LNG fleet. And the carbon footprint is a lot lot less than coal.

Holding BOW RPM VPE and VPEO...all with links to majors with the know how and capital to get it to Gladstone and exported as LNG.

The following increase in values are very interesting and will give an indication of the value of holding CSG stocks

QGC 50 cents to 550 cents in 26 months


Edit 1 June 2008

Hey I hit the wrong button and got sent to the start and thought I would scroll through... and then I saw this chart from my post on 5 May and I saw proof as to why we have only just started. If you look closely you will see that the only ones not to have taken off are BUL RPM VPE AND BOW....

All the rest have certification against their name. These ones dont. I couldnt understand why BUL hadnt taken off and then I saw it. Not properly certified.

Just a matter of waiting. And I have got the time.
AOE 60 cents to 290 cents in 16 months
SHG 40 cents to 200 cents in 14 months
MPO 20 cents to 145 cents in 14 months
BUL 12 cents to 29 cents in 14 months
MEL 20 cents to 85 cents in 20 months
PES 20 cents to 85 cents in 14 months

VPE still stagnating at 18 cents
BOW still stagnating at 26 cents
RPM still stagnating at 8.4 cents

DYOR . CSG has now gone INTERNATIONAL!!!

[Phaedrus]

VPE still stagnating at 18 cents
BOW still stagnating at 26 cents
RPM still stagnating at 8.4 cents

Huh?

VPE 14.5 cents to 20.5 cents in 1 month
BOW 18 cents to 27 cents in 2 weeks
RPM 4 cents to 8.4 cents in 3 months

[bermuda]

Huh?

VPE 14.5 cents to 20.5 cents in 1 month
BOW 18 cents to 27 cents in 2 weeks
RPM 4 cents to 8.4 cents in 3 months

Phaedrus,
These guys havent even started.

BOW was 37 odd a couple of months ago........ before all this BG stuff
VPE hit 23 cents a couple of months ago.........before all this BG stuff.
Opes stuffed BOW and VPE has always been hated...

and as for RPM ..... The CEO is going to go out in a blaze of glory.

The International LNG price of CSG is multiples more than Queensland domestic gas.

Beautiful eh, and no charting required. ( believe me I am hopeless at charting...just see the fundamentals)

[COLIN]

As I stated on the PRC:NZX thread, many thanks for your tutoring on the relative merits of CSG opportunities. SHG seems to be having a good run and VPE was also up well today. I also bought some BOW today at 26.5 and they ended quite well. RPM has yet to attract more attention, but it is quite a minnow and hard to notice I suppose.
My holdings are at relatively modest levels, but I hope to add, but that means dumping other shares and, as you know, its hard to pull out of ones that you are also convinced have good prospects.

[STRAT]

Phaedrus,
These guys havent even started.

BOW was 37 odd a couple of months ago........ before all this BG stuff
VPE hit 23 cents a couple of months ago.........before all this BG stuff.
Opes stuffed BOW and VPE has always been hated...

and as for RPM ..... The CEO is going to go out in a blaze of glory.

The International LNG price of CSG is multiples more than Queensland domestic gas.

Beautiful eh, and no charting required. ( believe me I am hopeless at charting...just see the fundamentals)
Bermuda please excuse my ignorance and/or laziness but why Queensland over and above other states? There are plays in other regions.

[redzone]

valuation on AOE is over $4 without its Indian plays

[bermuda]

Bermuda please excuse my ignorance and/or laziness but why Queensland over and above other states? There are plays in other regions.

The export of LNG through Gladstone will command International prices and therefore those companies with access to the infrastructure ( 300km pipeline) and equity links to the ownners of the LNG plant will be best off. That's why I like VPE and RPM ( good links to QGC/BG ) and BOW and PES ( good links to ARROW )

The other states havent got geared up yet with a LNG plant but dont worry the domestic price of gas across all Australia will be in for a huge boost.

Hope this answers your query.

[Dr_Who]

Thanks to Bermuda I am set in VPE, only a modest amount of shares. :) Was waiting for the price to come down to accummulate more shares, but that looks likely the sp wont come down.

[STRAT]

The export of LNG through Gladstone will command International prices and therefore those companies with access to the infrastructure ( 300km pipeline) and equity links to the ownners of the LNG plant will be best off. That's why I like VPE and RPM ( good links to QGC/BG ) and BOW and PES ( good links to ARROW )

The other states havent got geared up yet with a LNG plant but dont worry the domestic price of gas across all Australia will be in for a huge boost.

Hope this answers your query.In a nut shell, many thanks

[STRAT]

looks likely the sp wont come down.mmm. Duno about that Doc, Lets see how it goes today with the DOW in the red this morning ( well at this point anyway. an hour to go I think ).

[Dr_Who]

Mate, oil price is over $120! Energy stocks should rally again today.

[Financially dependant]

2P reserves up to $2.50/GJ

http://www.theaustralian.news.com.au/story/0,25197,23650997-5005200,00.html

exciting times!!

[STRAT]

Mate, oil price is over $120! Energy stocks should rally again today.
I agree Doc but what should happen often doesnt in this game. Anyway as I mentioned earlier I missed out on VPE. Should have coughed up the extra cent in hindsight but I never chase a stock so my post was probably more about optimistically looking for an entry than a Macca style prediction on the days events. :D

[seadog]

Hi Bermuda first of all thanks for putting me on to AWE and AOE three years ago or so. I remember researching AOE then sitting and sitting on about 50c then whoosh! The profits went into MPO a year later whoosh! Been in BOW prior to the placement (at the higher levels) and took the plunge yesterday with VPE (that latest preso did it for me).

I see ARU are gettin it together with their multi resource at Nolans. Rare earths, phosphate & uranium not to mention the gold, nickel and vanadium.

I'm a small time player but lovin it!

[Financially dependant]

This may be of interest to us CSG investors

http://europe.theoildrum.com/node/3959#more

[COLIN]

Could I ask you to be so kind as to refer to my posting tonight under LNC? Would be v. interested to hear your assessment.
Many thanks, in anticipation.

[underground]

anyone interested in CSG should definately check out SXP.ASX.. has gone up 50% very recently.

discl: reduced holding in SXP in the past week to hold a free carried position

[bermuda]

This may be of interest to us CSG investors

http://europe.theoildrum.com/node/3959#more

Thanks. A good report. Exactly why I am into Coal Seam Gas.

The first LNG tankers were built in the 70's. As at March 2007 there were 245 plying their trade. But listen to this...

There are over 150 on order.

LNG goes higher.

[Financially dependant]

A big year for gas this year (maybe bigger then oil)

http://www.theoildrum.com/node/3981#comments_top

worth a listen, a lot on natural gas.

http://www.financialsense.com/fsn/main.html

"I listened to the Joe Dancy interview.

He notes that natural gas prices have not made their usual dip at this time of year, and that the futures market shows an almost continuous increase in price. He expects gas prices to continue to be high, or increase, for the following reasons:

The Independence Hub, which supplies about 10% of the natural gas from the Gulf of Mexico (2% of the US total) has been shut in since April, and is not expected to be online until mid-June. (story)

LNG imports are down to 25% of what they were are year ago, because we are being outbid by other countries, such as Japan.

Several forecasters are expecting an active hurricane season. This begins June 1.

Storage is relatively empty, and needs to be filled.

Electrical demand for natural gas is rising, because of all the natural gas facilities built in recent years. If the summer turns out to be hot, the demand could really increase. The Northeast is particularly of note, because of its big use of natural gas and forecasts for a hot summer."

[mark100]

Attached is a summary of CSG players ranked by EV/Reserves prepared by Wilson HTM.

Unlike the jonny come lately brokers, Wilsons backed coal seam gas before any other broker in Australia. They were behind the IPO's of QGC and AOE back in the days when no one was interested and more recently have been raising cash for SHG.

[bermuda]

Attached is a summary of CSG players ranked by EV/Reserves prepared by Wilson HTM.

Unlike the jonny come lately brokers, Wilsons backed coal seam gas before any other broker in Australia. They were behind the IPO's of QGC and AOE back in the days when no one was interested and more recently have been raising cash for SHG.

Hey Mark 100.
That was some post. I didnt realise that BG and Petronas were partners!

This is getting better by the minute for all players, particularly RPM and VPE.

Thanks again

[mark100]

Yeah i didn't either! I reckon we could end up with one super size LNG plant under a joint venture arrangement, meaning lots of consolidation coming up in the next couple of years

[bermuda]

Yeah i didn't either! I reckon we could end up with one super size LNG plant under a joint venture arrangement, meaning lots of consolidation coming up in the next couple of years

Probably two...that's how I have always seen it. Certainly not 4 but nothing surprises me in this game.

[macduffy]

Attached is a summary of CSG players ranked by EV/Reserves prepared by Wilson HTM.

Unlike the jonny come lately brokers, Wilsons backed coal seam gas before any other broker in Australia. They were behind the IPO's of QGC and AOE back in the days when no one was interested and more recently have been raising cash for SHG.


Thanks for that, mark.
Interesting that Wilsons don't include Beach in their comparisons, despite BPT holding 40% of the Tipton field ( with AOE).
I guess they just don't cover the company for one reason or another.

[Lebowski]

Andrew Peaple | May 31, 2008

THE sudden interest in Australia's coal seam gas sector from large coal and gas producers has created more than just a hint of a bubble in the sector.

Turning coal seam gas into liquefied natural gas is a promising technology -- but nobody has actually produced large amounts from it so far and the projects now in focus will take several years to bear fruit.

Companies with strong LNG expertise might have the patience and resources to see their investments through.

For ordinary shareholders, impatience -- cashing out now to take advantage of the dizzying rise in the sector's share prices over the past two days -- would be smarter.

On Thursday, Malaysia's Petronas sealed a $2.6 billion deal to acquire a 40 per cent stake in a project being developed by Santos. And meanwhile, Britain's BG Group is pondering whether to lift its $13 billion bid for Origin Energy, after the Australian target rejected the offer yesterday.

The deal news has triggered share prices for companies with coal seam gas interests -- including Queensland Gas Co, Arrow Energy and Sunshine Gas -- to rise upwards of 30 per cent since BG launched its bid for Origin on April 29.

And the high price that Malaysia's Petronas paid for its stake in the Santos project has caused Origin's assessment of its own worth to spiral.

Origin chief executive Grant King now says the company's gas reserves are worth about $15.3 billion, coquettishly claiming that the company has plenty of other foreign suitors. He also knows that BG is keen for a deal to help it fulfil more cheaply a new 20-year contract it has to supply Singapore with LNG.

Although its rejected offer was already about 70 per cent higher than Origin's average share price earlier this year, debt-free BG might well stomach a higher price for Origin.

But other investors should be wary of the catalysing effect that the bid process is having on other stocks in the sector.

Andrew Pedler, an analyst at Wilson HTM in Brisbane, notes that the sector is now worth $6 billion, compared with $100 million just five years ago -- a rapid increase by any stretch.

There are also doubts as to how profitable the capital-intensive coal seam gas extraction process can really be, and the time that it will take for projects to come good -- Santos's development will only allow LNG production by 2014 at the earliest.

Word is that BG's deal team have packed their bags and are heading back to London as the company "considers its options". Other investors would do well to follow suit.

Dow Jones Newswires

I love the csg story but this article has a hint of caution.

[mark100]

For sure caution is now warranted. CSG is highly capital intensive and no where near as profitable as producing conventional gas.

Some companies are running simply because they have some land which may hold CSG. That is stupid.

The attraction of the sector in my view all depends on how high you ultimately think oil will go in the next few years. In the future I don't just see CSG being used for export LNG. I see it being converted into liquid fuel for use in Australia's transport fleet given our growing dependence on imported crude

[shasta]

For sure caution is now warranted. CSG is highly capital intensive and no where near as profitable as producing conventional gas.

Some companies are running simply because they have some land which may hold CSG. That is stupid.

The attraction of the sector in my view all depends on how high you ultimately think oil will go in the next few years. In the future I don't just see CSG being used for export LNG. I see it being converted into liquid fuel for use in Australia's transport fleet given our growing dependence on imported crude

Mark

Air NZ has come out & said its investigating the possibility of using biofuels in the future, especially in the aviation (& transport) industries where high fuel prices make material impact on the bottom line.

UCG & CTL/GTL will also play an important part, ie LNC especially when the recovery rates are far superior to CSG.

I think the CSG sector is hot, because its now ripe for consolidation, you wont have all the juniors building processing plants, only a few larger players will, but those with certified resources have bulls-eyes on them.

I'm picking most people holding O&G shares will be predicting oil prices > $US150/bbl at sometime during 2008, there will be a correction at some point but demand is still pushing prices upwards.

I'm not invested into the CSG sector at present, (though i did just sell ESG) mainly because i'm looking at the Alternative Energy sector...

The higher the price of oil the more alternatives will come online, obviously not all are viable but there are some very interesting companies out there.

Ive done alot of research on Alternative Energy & will start a thread & share my thoughts when i'm finished.

Disc: Am looking at VPEO sub 10c to gain exposure to CSG, although i do believe MPO is the most undervalued company in the CSG sector.

[COLIN]

Would be interested in your reaction to the "Cautions" posted above, as I know you have done considerable research in this area. I thought that the feasibilty of economic conversion to LNG was a given?

[seadog]

THIS BUBBLE MAY HAVE A FAIR BIT OF PUFF IN IT YET- CHECK THIS OUT FROM THE TIMES IN THE UK-

LINK- http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4036235.ece

From The TimesMay 31, 2008

HIGHLIGHT-Yesterday, Arrow Energy the fourth-largest producer was in a trading halt as energy majors, rumoured to include Shell, circled. Analysts say that BP, ENI and Total are interested.

FULL ARTICLE.

Australia strikes it rich as oil majors scent big potential of coal-seam gasPaul Larter
A dead canary in the hot, wet and filthy confines of a coal mine once meant a panicked evacuation. Natural gas was the most perilous of hazards, and a fall from the perch was an early warning of potential explosions, poisonous air or both.

This year, the rush has been back down the shaft as soaring prices and demand in Asia-Pacific have drawn BG Group and its international competitors to the world's largest resource of coal's unloved bedfellow: methane.

The charge is centred on what Australia's Science Agency estimates is 250 trillion cu ft of gas locked in vast Jurassic coalfields largely under the sweeping agricultural plains of southern Queensland. Proven reserves are a fraction of that but confirmation of the full resource would make this tiny portion of the country the world's fourth-largest source of natural gas - ahead of Saudi Arabia.

Aiden Bradley, an analyst at ABN Amro Morgans in Sydney, said: “The potential is pretty mind-boggling. Historically because of Australia's isolation, it was not worth a lot. Now there's the potential to export it through LNG because of the buoyant market in Asia. This is one of those last great deposits - an almost infinite resource.”

Related Links
Origin Energy rejects improved offer by BG
BG £6.1bn move to tap Asian gas market
A few hundred kilometres up Queensland's coast, at the industrial port city of Gladstone, a parallel race is on: to build the world's first liquefied natural gas (LNG) plant fed by coal-seam gas. Four LNG projects worth more than A$20 billion (£9.7 billion) are set to come on stream from 2011-13.

BG, the biggest gas trader, was the first big energy group to move, signing a joint venture in April with Queensland Gas Company (QGC), the third-biggest coal-seam gas producer, to build an LNG plant. Less than a month later it bid A$12.9 billion for Origin Energy, the sector's leading company.

Two days ago, Petronas of Malaysia, the world's third-biggest LNG producer, joined the fray by paying US$2.5 billion (£1.27 billion) for a 40 per cent stake in the coal-seam gas operations and planned LNG plant of Santos, Australia's No 3 oil and gas producer.

Yesterday, Arrow Energy the fourth-largest producer was in a trading halt as energy majors, rumoured to include Shell, circled. Analysts say that BP, ENI and Total are interested.

Thanks in part to BG's tilt at Origin, the market has finally recognised that the Australian continent is of a similar size to the US, but with gas domestic consumption of just 0.5 per cent of the bigger economy. Coal-seam gas supplies about 18 per cent of the eastern Australian gas market but the domestic market is tiny and production increased 44 per cent last year.

In Asia-Pacific alone, annual LNG demand is expected to double from 100 million tonnes to almost 200 million tonnes a year by 2015. Additionally, the booming markets of Asia are a relatively short journey away by sea.

But some analysts say the prospect of Gladstone becoming a hub for LNG exports into Asia-Pacific are not yeat clear-cut as no one has built an LNG plant fed by coal-seam gas.

Richard Cottee, QGC chief executive, says there are uncertainties but says his company has “cracked the code” to key technological barriers in drawing the gas from coal. His company and more than a dozen others have already succeeded where BP and Amoco failed in the Nineties. Conventional gas is caught between grains of rock such as sandstone.

But 70 per cent of the gas is between the molecules of coal and only 30 per cent in the gaps. So while BHP and Anglo Coal are producing coal-seam gas, albeit at small levels, most of the majors have pursued it using conventional methods and, as a result, have harvested only 30percent of the potential.

Coal play

— Coal-seam gas is a natural gas formed as a byproduct during the coalification process in which organic matter is turned into coal

— To extract the gas a hole is drilled down into the coal seam and is cased. The coal seam is perforated which then enables the gas to flow to the surface, where it is gathered and processed as required

— Coal-seam gas is odourless and is used like any other gas to power homes and industry and as a fuel for electricity generation

[bermuda]

Would be interested in your reaction to the "Cautions" posted above, as I know you have done considerable research in this area. I thought that the feasibilty of economic conversion to LNG was a given?

Hi Colin,
I wouldnt get too fazed about this technolgy not working. Havent given it a thought.

Of course it is going to work. Look at the companies involved and the billions of dollars involved. I dont go along with those who say things cant be done. You can do anything and I wouldnt want to argue with all this momentum.Reminds me a bit of Pike really.Man, there were a lot of knockers there. PRC is going to go crazy.

What we have is an international situation which is the complete beauty of it.

I dont think I have ever got involved so strongly in anything is my life as much as this.

Here is how I see it

Peak oil is here and has been here since 2005. At these prices production normally goes up.

They cant produce any faster than 87 million barrels per day.!!!! End of story.

And demand destuction in the west is going to be cancelled out by big growth in China and India. Even the IEA ( who used to deny Peak oil) has changed their mind and started saying we have a serious problem.

So we have to look for alternative and one of them is gas...LNG...so long the poor sister to crude oil. And now gas is going to have its day in the sun for a whole host of reasons. To think they used to flare it.!!!

The volume of LNG is forecast to trble quickly over the next few years.There are about 250 LNG vessels on the trade which I think started back in 1970 when Algiers starting exporting to France. Right now there 150 more on the order books !

And British Gas saw off Woodswide as a monopoly supplier of LNG into the new Singapore hub to be built. Look, the LNG market is absolutely going gangbusters ( sorry Shrewdie..stole your phrase ) and the price is rising all the time.And will continue to do so.

And here we have Japanese interests in Queenslad CSG. ....Plus British Gas,...... plus Petronas from Malaysia and..... shortly we will be hearing from Petronet from India. And British Gas just have to have the gas believe you me. Origin's rebuttall was just so beautiful. They will be back. They have got contract commitments to Singapore ( Woodside will remind them of that!! )

This is so good it is almost unbelievable. Would never sell any of my shares whilst all this is going on. This isnt some little bubble or something . This is a serious energy play.

And there is another big play coming up too. Just about got my head around it. UCG. Underground Coal Gasification.

But in the meantime and as I said about 6 months ago

This is going to be bigger than TEXAS.

[Huang Chung]

So, any thoughts as to who Arrow are selling down their CSG interests to...some big global similar to BG or Petronas?

[bermuda]

So, any thoughts as to who Arrow are selling down their CSG interests to...some big global similar to BG or Petronas?

Could be Petronet but I dont like getting into these guessing games. Could be anyone but yes I agree it will a company with capital.

Thanks everyone for all the recent posts. Exciting eh.

[shasta]

So, any thoughts as to who Arrow are selling down their CSG interests to...some big global similar to BG or Petronas?

AOE have 60% of the Tipton West CSG project, i wonder if any predator is looking at BPT (who own the other 40%).

I have been looking at BPT for that project alone

[Huang Chung]

Leb, underdog...probably beat you guys to the puch and pointed out yesterday on the AOE thread that I see signs of a mania brewing with CSG.

Probably safe enough for now, but unfortunately, rubbish stocks will move with the rising tide, and at some stage, will leave punters in these stocks high and dry.....interesting how all sorts of CSG related stocks are being mentioned here on ST for the first time in the last week or so.

Depending on what AOE announce tomorrow, we might see a new wave of buying in the sector.

Having said that, if I wasn't fully invested at the moment, I probably would have followed Bermuda's lead and bought a swag of BOW. I held them for a short while, but sold.

[Huang Chung]

AOE have 60% of the Tipton West CSG project, i wonder if any predator is looking at BPT (who own the other 40%).

I have been looking at BPT for that project alone

For about 2 seconds, I thought that Beach might be buying AOE's 60% share of Tiptin West...but BPT didn't go on a trading halt, so it's probably something else.

[shasta]

For about 2 seconds, I thought that Beach might be buying AOE's 60% share of Tiptin West...but BPT didn't go on a trading halt, so it's probably something else.

Nice to see others thinking outside the square!

There's big money to be made in these "plays" :D

[Dr_Who]

The fact that all the big boys are buying up the CSG majors are telling that they have the tech and gas demand exceeds supply. I dont believe there is a bubble for the simple fact that the big boys are now feasting big time and paying a huge premium for a snack.

[upside_umop]

enron an energy bubble?
...dont even try to relate the two!

many factors led to enrons collapse, accounting (both athur andersen and mark to market), executives, sec the list goes on....but not an energy bubble.

but yes..they were 'big boys' in a fake sort of way. i dont think BG is fake.

[bermuda]

The following increase in values are very interesting and will give an indication of the value of holding CSG stocks

QGC 50 cents to 550 cents in 26 months


Edit 1 June 2008

Hey I hit the wrong button and got sent to the start and thought I would scroll through... and then I saw this chart from my post on 5 May and I saw proof as to why we have only just started. If you look closely you will see that the only ones not to have taken off are BUL RPM VPE AND BOW....

All the rest have certification against their name. These ones dont. I couldnt understand why BUL hadnt taken off and then I saw it. Not properly certified.

Just a matter of waiting. And I have got the time.
AOE 60 cents to 290 cents in 16 months
SHG 40 cents to 200 cents in 14 months
MPO 20 cents to 145 cents in 14 months
BUL 12 cents to 29 cents in 14 months
MEL 20 cents to 85 cents in 20 months
PES 20 cents to 85 cents in 14 months

VPE still stagnating at 18 cents
BOW still stagnating at 26 cents
RPM still stagnating at 8.4 cents

DYOR . CSG has now gone INTERNATIONAL!!!

I have really botched this up but it all relates to my post on 5 May where BUL stood out as a 'non performer'. Reason is because of the lack of reserves. This is big.This is not a ramp. Just a matter of fact.

[shasta]

enron an energy bubble?
...dont even try to relate the two!

many factors led to enrons collapse, accounting (both athur andersen and mark to market), executives, sec the list goes on....but not an energy bubble.

but yes..they were 'big boys' in a fake sort of way. i dont think BG is fake.

Its a bit of a stretch to call cashed up majors wanting certfied resources a bubble.

There's substance to this & whilst not all companies will benefit (ie, they need to be close enough to a processing plant, or have a company with a plant buy there feedstock supply).

Especially in QLD where there are a few companies close by that either have, or will have a certified resource. (Same for NSW!)

Only the majors will have the necessary funds to build the processing plants & there can only be so many...

Thats where this "bubble" (as you call it) comes in, the smaller players close enough to the plants will be "absorbed" by the majors to build up there resource sufficient to obtain long term supply contracts.

Again, some companies will do extremely well & some will get left behind.

Oops sorry Upside - i copied the wrong quote, i meant the post above yours!

[Huang Chung]

There has been a complete sea change in the thinking around gas in Queensland over the past 5 or so years.

Some of you may not realise that one of the big projects that was going to happen in Queensland, right about now, was the building of a gas pipeline from PNG, across the Torres Strait to Cape York, and down the Queensland coast to Gladstone. In later planning, this was extended to Brisbane, and then further plans were developed to get it to Moomba, and from there, into the existing pipeline network into the southern markets.

CSG was virtually unheard of 5 years ago...I think Origin would have been the only player who had CSG in production. Smaller players faced the threat of huge competition from our north.

The PNG pipeline faced a lot of internal challenges, as the various up stream and down stream players could never seem to agree on moving the project forward, and commiting the necessary gas reserves to ensure the projects viability. In the meanwhile, the cost of the project kept rising, and Queensland's CSG players were starting to gain some traction with their projects, and in the market place, especially with big downstream players such as AGL, who had previously been committed to the PNG pipeline.

The eventual cancellation of the PNG to Queensland gas pipeline gave the Queensland CSG industry the chance to grow in relative peace. Importantly the CSG companies have demonstrated that they can reliably supply big industry with gas...particularly the gas fired power generators and other big gas users such as Incitec Pivot's ammonia and urea plant at Gibson Island plant in Brisbane..... Reliability of CSG supply to industry was a major concern that CSG producers had to overcome.

The move to establish LNG export facilities in Gladstone is evidence of the paradigm shift in the thinking around gas in this market...from potential large importer, to possibly even larger exporter.

So there you have it....the gas industry and Queensland itself look set for a very bright future on the back of CSG. Let's hope that the industry grows sensibly, and players don't start paying over the odds for reserves, or set up too may competing pipelines and export facilities. Commonsense and collaboration should be the name of the game.

Last thing we want is for it to all end in tears.

[bermuda]

Cant get my entries into the SS competition because their site is down.I have to get them in by 9am Aussie time so I will enter them here for reference sake.( Even though it is a different site )
June Picks
BOW
SXP
RPM
Cheers
All coal seamers but SXP has the thrill of UCG

[Romer]

Bermuda. You mention MPO 20 cents to 145. Don't forget the 5x consolidation in there somewhere. - - Still. Is doing very nicely thank you. :)

[COLIN]

Hi Colin,
I wouldnt get too fazed about this technolgy not working. Havent given it a thought.

Of course it is going to work. Look at the companies involved and the billions of dollars involved. I dont go along with those who say things cant be done. You can do anything and I wouldnt want to argue with all this momentum.Reminds me a bit of Pike really.Man, there were a lot of knockers there. PRC is going to go crazy.

What we have is an international situation which is the complete beauty of it.

I dont think I have ever got involved so strongly in anything is my life as much as this.

Here is how I see it

Peak oil is here and has been here since 2005. At these prices production normally goes up.

They cant produce any faster than 87 million barrels per day.!!!! End of story.

And demand destuction in the west is going to be cancelled out by big growth in China and India. Even the IEA ( who used to deny Peak oil) has changed their mind and started saying we have a serious problem.

So we have to look for alternative and one of them is gas...LNG...so long the poor sister to crude oil. And now gas is going to have its day in the sun for a whole host of reasons. To think they used to flare it.!!!

The volume of LNG is forecast to trble quickly over the next few years.There are about 250 LNG vessels on the trade which I think started back in 1970 when Algiers starting exporting to France. Right now there 150 more on the order books !

And British Gas saw off Woodswide as a monopoly supplier of LNG into the new Singapore hub to be built. Look, the LNG market is absolutely going gangbusters ( sorry Shrewdie..stole your phrase ) and the price is rising all the time.And will continue to do so.

And here we have Japanese interests in Queenslad CSG. ....Plus British Gas,...... plus Petronas from Malaysia and..... shortly we will be hearing from Petronet from India. And British Gas just have to have the gas believe you me. Origin's rebuttall was just so beautiful. They will be back. They have got contract commitments to Singapore ( Woodside will remind them of that!! )

This is so good it is almost unbelievable. Would never sell any of my shares whilst all this is going on. This isnt some little bubble or something . This is a serious energy play.

And there is another big play coming up too. Just about got my head around it. UCG. Underground Coal Gasification.

But in the meantime and as I said about 6 months ago

This is going to be bigger than TEXAS.

Bermuda - many thanks - my confidence has been restored!
(I also took heart from "The Great Global Warming Swindle" on Prime last night - but that's another story, best left for the "Off Market Discussion" Forum, I guess.)

[mark100]

Worth listening to Grant King from Origin speak to Inside Business. Can be viewed at

www.abc.net.au/insidebusiness

[bermuda]

Worth listening to Grant King from Origin speak to Inside Business. Can be viewed at

www.abc.net.au/insidebusiness

Thanks Mark,
Very interesting. Going gangbusters today.

[tricha]

Shell joins coal seam gas race


Font Size: Decrease (http://www.theaustralian.news.com.au/story/0,25197,23800335-643,00.html#) Increase (http://www.theaustralian.news.com.au/story/0,25197,23800335-643,00.html#)
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Matt Chambers | June 03, 2008

GLOBAL gas majors are in a scramble to get a foothold in Queensland's rapidly evolving coal seam methane industry, having bid more than $10 billion for reserves in the past few days as they look to feed a huge predicted jump in Asian liquefied natural gas demand.
http://www.theaustralian.news.com.au/common/imagedata/0,,6072373,00.jpg Arrow Energy CEO, Nick Davies in his Brisbane HQ after he announced a deal with Shell. Picture: David Sproule


Royal Dutch Shell yesterday became the third major to move into Gladstone's rapidly evolving LNG industry, striking a $776 million deal to buy into Arrow Energy's resources and greatly improving the chances of multiple LNG plants in the region.
Following on the heels of Malaysia's state-owned Petronas, which bought into Santos's Queensland LNG plans last Thursday, Shell has struck a deal to take a 30 per cent stake in Arrow's CSM licences in that state.
The purchase means three experienced LNG operators are now involved in competing projects to export liquefied coal seam gas to Asia's booming markets.
The move by the majors to get a foothold in CSM-sourced LNG, which two years ago was barely considered an industry, has sent shares of the Australian companies involved surging as unexpectedly high prices have been paid for reserves.
Santos, Australia's second-biggest oil and gas company, set a benchmark for CSM assets last week when it sold 30 per cent of its interests to Petronas for $2.5 billion.
The high sale price scuttled BG's planned $13.6 billion takeover of Origin Energy, with the target's board deciding at the last minute that the offer did not value the gas assets highly enough.
JPMorgan analysts attributed $6.9 billion of the bid to Origin's gas assets.
Shell has signed a preliminary agreement to buy into Brisbane-based Arrow's Australian assets for an upfront fee of $435 million, will pay another $139 million when an LNG project is approved and another $70 million when it is producing a million tonnes of LNG a year.
Shell will also pay up to $132 million for a 10 per cent stake in Arrow's international unit, which has CSM assets in China, India, Vietnam and Indonesia.
Arrow managing director Nick Davies described the deal as "company-making" and said that despite having had as many as 10 parties being interested in linking up, he preferred to deal with Shell rather than putting the ground up for tender.
"We've been very focussed on completing a deal with Shell because strategically we think they are the right company to be dealing with," Mr Davies said.
"They're strong in India, strong in China and a leading LNG company." He indicated Santos's deal with Petronas had not led Arrow to try to squeeze a better deal out of Shell.
Arrow shares surged 14 per cent on the news to close at a record $3.79, while LNG Ltd, which is planning to build a plant producing up to 1.5 million tonnes a year plant in Gladstone, rose 12 per cent to $1.05.
Arrow has agreed to supply gas to LNG Ltd for its planned plant, about half the size of those planned by BG, which is teaming up with Queensland Gas Co, and the Santos/Petronas partnership.
"When you have majors scrambling to farm in or fund joint ventures, it's obviously a positive endorsement of the coal seam methane strategy," said Scott Ashton, an analyst at brokerage BBY in Sydney.
He said there was room for questions over whether all the projects would get up within the intended time frame of 2011 to 2014, given combined development costs of up to $25 billion, possible skill shortages and capital constraints.
Mr Davies said it was intended that the three parties would develop Arrow's CSM LNG plans together, but some analysts questioned whether Shell would be happy supplying and buying from a plant that did not use its technology.

Mr Davies said he expected Shell to talk to LNG Ltd soon, but Shell would not confirm this.

"No decisions have been made regarding any potential LNG schemes, but we're very supportive of Arrow's aspirations," Anita Harben, a Perth-based spokeswoman for Shell, said.

LNG Ltd chief executive Maurice Brand said Shell's involvement was a positive for Arrow's plans to deliver gas to LNG's project.

All eyes will now be on Origin's plans to cash in on its gas reserves.

While Santos has indicated it is not looking for more gas, BG is expected to be still interested and Shell could want more ground, as could other majors.

[upside_umop]

The bit that gets me is...

'....despite having had as many as 10 parties being interested in linking up...'

There is a lot who still want a piece of this.

[Financially dependant]

Oil currently up 0.21% and Natural Gas up over $12 by 3.26%

Maybe due to Bolivian government taking control of gas pipe line from Royal Dutch Shell!

http://news.bbc.co.uk/2/hi/business/7432280.stm

This could be turning into another perfect storm!

[redzone]

most likely profit taking today in AOE but I dont expect that to last.....there is plenty of upside in all of these companies if the big fish continue to chase the sprats

[Dr_Who]

Can someone list in order the companies with the largest LNG/CSG reserver in order?

[Phaedrus]

Doesn't the CSG report attached by Mark100 to post #26 on Page 2 give you what you are looking for?

[macduffy]

Doesn't the CSG report attached by Mark100 to post #26 on Page 2 give you what you are looking for?


They're not a big player in CSG but BPT aren't included in Wilson's list. They have 40% of AOE's Tipton West field which produced 1,752 TJ gross in the March 08 quarter, 700 TJ net to BPT.

[Huang Chung]

You may find the following map useful.

http://www.pipeliner.com.au/map/map.html

[tricha]

Bermuda has one above his bed :) In fact I hear he is moving to Gladstone.;)

Hey Huang, I'm amazed you have not bought in yet ?


You may find the following map useful.

http://www.pipeliner.com.au/map/map.html

[Huang Chung]

No doubt about it T, I've missed a great run with the CSG stocks. In the last 2 years, I've held AOE, MEL, and BOW at various stages, but wasn't on board for this current run.

No spare cash either. :mad:

[Dr_Who]

Interesting to see Natural Gas continues to strengthen while oil and gold has weakened.

[Financially dependant]

Interesting to see Natural Gas continues to strengthen while oil and gold has weakened.

Yes I have been following that new trend, If there is a hot summer in US (particularly in North West) then there should be a real tighten of a tight gas market!

[Dr_Who]

FD, how does a hot summer have an effect on gas price?

I usually kept an eye on Asia demand.

I am loaded up on gas stocks... LOL

[Financially dependant]

FD, how does a hot summer have an effect on gas price?

I usually kept an eye on Asia demand.

I am loaded up on gas stocks... LOL


Gas fired power stations running all the air conditioners!

Hold NZO, VPE, VPEO, BOW & RPM.......me too.:)

[Financially dependant]

Oil down 1.74%
Gas up 1.37%

The separation continues, looks like the spec money is switching to gas?

http://www.bloomberg.com/apps/news?pid=20601109&sid=aC0XVAQrWCiU&refer=home

[Dr_Who]

I actually think it is good to have the oil price consolidate. The consolidation will give the world (esp the Americans) a false sense of security which allows them to start driving their SUVs and burn gas as if it is a infinite resource.

Go gas go!!! :)

[Phaedrus]

http://h1.ripway.com/Phaedrus/CSG65.gif

[trackers]

Very interesting Phaedrus, I had wondered about that. Thx!

Another leg-up for some of these I suspect...

[Dr_Who]

Awesome graph Phaedrus. :)

[bermuda]

Thanks Phaedrus.

Wonder when British Gas will up their bid to $A20 ??

[Footsie]

sector taking a beating today.....

cant help but feel that this really just represents antoher buying opp for CSG

The story has not gone away

If these stocks get smacked in a market sell off... i'll be in boots and all.

At least my preferred play in MPO is hardly off

[mark100]

From Business Spectator website - he seems to like CSG! He's also been buying into BPT

Secret billionaire

The best performing investment fund in the world is a small fund in Sydney called Mathews Capital, run by a former stockbroker named Phil Mathews.

Mathews and his fund are currently being whispered about in hushed tones in cafes around Sydney. Some say he is Australia’s secret 39th billionaire. Others that he has made one of the world’s biggest oil futures bets this year, producing a return of 80 per cent for his investors in May alone.

I tracked Phil Mathews down to his Sydney office, and it would be fair to say that the phrase 'a private person' was invented for him. It would easier to interview a rock.

Apart from the rumours about him that have been buzzing around Sydney lately, my eye had been caught by a substantial shareholding notice that popped up on Business Spectator this week, saying: “Mathews Capital Partners bought 30,472,664 Santos shares between June 2, 2005 and May 27, 2008, becoming substantial a shareholder with 5.12 per cent.”

That stake in Santos is worth $660 million. Mathews told me this morning that his main fund – called the Sabre Fund - totals $2 billion, and there are two others in his stable worth a total of $1.5 billion, called the Tomahawk Fund and the Velocity Fund.

So he has a third of his main fund in Santos. This is a man who likes a big bet.

According to other recent substantial shareholder filings Mathews also owns 19.6 million shares in Nexus Energy, 15.4 million in Arrow Energy, 9.6 million in Metgasco and 6.5 million in Pure Energy. On top of that he also owns 93 million shares or 10.5 per cent of Renison.

I make that another $122 million invested in gas, on top of the Santos play.

Mathews says his fund is basically an energy fund, and that he started progressively moving out of industrials in 2004.

He would only say two things about his performance before clamming up: that his investment return for the period since July 1, 2007 has been 210 per cent, and that Bloomberg has described Mathews Capital as the world’s best performing fund over one, three and five years.

I couldn’t find that reference, and Mathews wouldn’t say what his one, three and five year performances have been, but I think we can assume it’s true. It has certainly been a very good time to be an energy fund.

He wouldn't comment on the stories about a big oil futures bet, but one thing we know for sure: he is making a massive bet on coal seam gas.

“It’s bigger than the Bass Strait,” he told me. “Santos has 100 trillion cubic feet, which is equivalent to 40 billion barrels of oil. 40 billion barrels! That’s bigger than that new oil discovery off Brazil.”

And, yes, in case you were wondering Sabre Fund has been closed for 18 months, but the Tomahawk Fund and the Velocity Fund are still open.

[The Big Ease]

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4036235.ece


A dead canary in the hot, wet and filthy confines of a coal mine once meant a panicked evacuation. Natural gas was the most perilous of hazards, and a fall from the perch was an early warning of potential explosions, poisonous air or both.

This year, the rush has been back down the shaft as soaring prices and demand in Asia-Pacific have drawn BG Group and its international competitors to the world's largest resource of coal's unloved bedfellow: methane.

The charge is centred on what Australia's Science Agency estimates is 250 trillion cu ft of gas locked in vast Jurassic coalfields largely under the sweeping agricultural plains of southern Queensland. Proven reserves are a fraction of that but confirmation of the full resource would make this tiny portion of the country the world's fourth-largest source of natural gas - ahead of Saudi Arabia.

Aiden Bradley, an analyst at ABN Amro Morgans in Sydney, said: “The potential is pretty mind-boggling. Historically because of Australia's isolation, it was not worth a lot. Now there's the potential to export it through LNG because of the buoyant market in Asia. This is one of those last great deposits - an almost infinite resource.”

A few hundred kilometres up Queensland's coast, at the industrial port city of Gladstone, a parallel race is on: to build the world's first liquefied natural gas (LNG) plant fed by coal-seam gas. Four LNG projects worth more than A$20 billion (£9.7 billion) are set to come on stream from 2011-13

wa wa wiwa!

[redzone]

I mentioned a stock a week or so ago....ERO.V this has great potential...worth doing DD and reading the news...well run company by a fellow ex aussie...had a bit of a run today ..I have a feeling tis could be just the beginning...on large volume today.

[The Big Ease]

a good overall article on CSG.

http://business.smh.com.au/gas-bonanza-20080606-2mzw.html?page=fullpage#contentSwap2

The east coast gas price sits at less than $4 a gigajoule, compared to more than $US11 in the US, or the spot LNG price of about $US17.

wow!
my journey of discovery is making my jaw drop at every turn.
i am yet to find anything negative. there has to be something! anything?

easier to drill
cheaper to drill
environmentally friendlier than natural gas extraction
massive untapped reserves
massive infrastructure works in qld to export into asia


you cant even call this a bubble. its merely an escalation in interest. CSMG pricing is hardly ahead of itself, not are the valuations given the huge uplift that will occur to prices to simply reach global parity.

man!

[redzone]

Sorry EOR.V....And it was up another 10% this morning....

[bermuda]

Sorry EOR.V....And it was up another 10% this morning....

Another huge lift for CSG today.

Oil goes higher and so does LNG.

What is George Soros going to say about the oil price today.?

Yesterday he said it was going down.

Read Twilight in the Desert. This is serious.

[rotweiller]

Interesting article in Sydney Morning Herald - smh.com.au - titled GAS BONANZA which I found very succint.
Cheers

[The Big Ease]

Interesting article in Sydney Morning Herald - smh.com.au - titled GAS BONANZA which I found very succint.
Cheers

pssst, look a few posts up ;)

[Huang Chung]

Was driving back from Bundy this morning and this was playing on the radio.

http://www.abc.net.au/cgi-bin/common/player_launch.pl?s=rn/backgroundbriefing&d=rn/backgroundbriefing/audio&r=bbg_08062008_2856.ram&w=bbg_08062008_28M.asx&t=Sunday 08 June 2008&p=1

Enjoy

[drillfix]

Was driving back from Bundy this morning and this was playing on the radio.

http://www.abc.net.au/cgi-bin/common/player_launch.pl?s=rn/backgroundbriefing&d=rn/backgroundbriefing/audio&r=bbg_08062008_2856.ram&w=bbg_08062008_28M.asx&t=Sunday 08 June 2008&p=1

Enjoy

Excellent link Huang, Thanks.

(see Colin, my eyes and ears are open...lol :D)

[airedale]

Thanks, Huang, worthwhile article to listen to.

[Mysterybox]

Thanks Huang, very nice.

[The Big Ease]

Was driving back from Bundy this morning and this was playing on the radio.

http://www.abc.net.au/cgi-bin/common/player_launch.pl?s=rn/backgroundbriefing&d=rn/backgroundbriefing/audio&r=bbg_08062008_2856.ram&w=bbg_08062008_28M.asx&t=Sunday 08 June 2008&p=1

Enjoy

that was amazing. thanks for the chungy.

[trackers]

More articles on coal seam gas making the headlines:

Gas bonanza:
http://business.smh.com.au/gas-bonanza-20080606-2mzw.html?page=fullpage#contentSwap2

http://www.businessspectator.com.au/bs.nsf/Article/Arrow-sees-Qld-LNG-exports-in-5-years-FE2AA?OpenDocument

[Archer]

thanks for sharing the links guys. This site is a credit to NZ. Cheers, A (an Aussie HC Exile )

[Huang Chung]

thanks for sharing the links guys. This site is a credit to NZ. Cheers, A (an Aussie HC Exile )

Yeah, it's not only Kiwi's on here Archer....a few Aussies like us as well. :)

[trackers]

thanks for sharing the links guys. This site is a credit to NZ. Cheers, A (an Aussie HC Exile )

Welcome aboard :) Quite a few of us check out hotcopper from time to time (good for gauging sentiment, but not hardcore research imo)

[Financially dependant]

The Big guns are concocting a plan!

http://www.theaustralian.news.com.au/story/0,25197,23849495-5005200,00.html

[Dr_Who]

It is interesting to see SXP and RPM T/O both priced at around the current marke sp.

I am thinking that maybe the small cap CSG stocks are all trading fully priced at current levels or something fishy is going on in the background.

[bear]

It is interesting to see SXP and RPM T/O both priced at around the current marke sp.

I am thinking that maybe the small cap CSG stocks are all trading fully priced at current levels or something fishy is going on in the background.

For some i think they are fully priced for others perhaps not so. Some have had IMHO unsustainable price appreciation.

There is a big difference between potential and realising that potential

most of the smaller players have been touting large amounts of resource and plants to process but the reality is there will be only a few and those that are will be major companies and the others will either be bought out or unable to fund the "promise"

Pick you winners and watch the big players when they become more active in this area.

Bear

[metal mickey]

That is interesting Dr,
perhaps they are just trying to get them cheap? im not keen to sell my RPM at that level, would prefer to at least squeeze out a few more QGC shares out of them, or cash even better. Hoping for another offer.
One CSG that doesnt get mentioned much is
MOS - a profitable O&G producer and are investigating CSG potential adjacent to their existing infrastructure at silver springs (surat basin). im hoping its going to follow in the footsteps of VPE and transform from market dog to darling.

[macduffy]

Well put, bear!
A timely reminder that not every company with oil or gas prospects is going to succeed, despite the current energy scene.

[drillfix]

Well put, bear!
A timely reminder that not every company with oil or gas prospects is going to succeed, despite the current energy scene.

I also agree with this.

But WHICH stocks does everyone here believe will make it into the Special FEW that shine through or obtain the most significant gain???

[shasta]

I also agree with this.

But WHICH stocks does everyone here believe will make it into the Special FEW that shine through or obtain the most significant gain???

The ones with JV's/farm-ins from the majors, & those who have the majors on there share register.

BOW has AOE, & VPE has QGC as two examples of who should do well.

[drillfix]

BOW has AOE, & VPE has QGC as two examples of who should do well.

Thanks Shasta, good on ya buddy :)

Now I just got to find some money so i I try to buy a few. :eek:

(I guess I wont be buying any this week then :D)

[Huang Chung]

So far this week we've had both RPM and SXP boards accepting bids without a fight, just when excitement in the sector is reaching new highs.

Is this just poor judgment on the part of the target companys, or are they seeing things being a bit overheated at the moment, and decided the best course of action is to take the money and run?

Thoughts anyone?

[shasta]

So far this week we've had both RPM and SXP boards accepting bids without a fight, just when excitement in the sector is reaching new highs.

Is this just poor judgment on the part of the target companys, or are they seeing things being a bit overheated at the moment, and decided the best course of action is to take the money and run?

Thoughts anyone?

Both RPM & SXP have vast potential resources, but no reserves as such.

Nor the infrastructure in place or cash to build there own plants.

Both though have had stellar runs & i feel a few holders may have got ahead of themselves allowing for "blue sky" potential in the SP.

Had British Gas not come along those shares would be half what they are now IMO.

I followed SXP closely from 23c (not that long ago, see thread), so its up over 200%.

Many folk here bought RPM between 6-8c & have doubled/trebled there money.

Perhaps a bit of greed & reality has hit home.:confused:

If there was so much unrealised potential, why did the boards cave in so easily? (They would know more than there shareholders?)

[bermuda]

Both RPM & SXP have vast potential resources, but no reserves as such.

Nor the infrastructure in place or cash to build there own plants.

Both though have had stellar runs & i feel a few holders may have got ahead of themselves allowing for "blue sky" potential in the SP.

Had British Gas not come along those shares would be half what they are now IMO.

I followed SXP closely from 23c (not that long ago, see thread), so its up over 200%.

Many folk here bought RPM between 6-8c & have doubled/trebled there money.

Perhaps a bit of greed & reality has hit home.:confused:

If there was so much unrealised potential, why did the boards cave in so easily? (They would know more than there shareholders?)

Shasta,
Because Cottee has hoodwinked Siller.

The May report on PL171 is a lot better than this offer. Here's hoping .

[shasta]

Shasta,
Because Cottee has hoodwinked Siller.

The May report on PL171 is a lot better than this offer. Here's hoping .

Maybe AOE or STO having a look at RPM?

[Huang Chung]

Only guessing here, but its probably not in the interests of the bigger players to have a bidding war for each extra bit of turf they want to control....the consolidation game is just beginning, so there is no point in raising the expectations of future targets.

Having said that, Arrow will probably lob a bid on the table tomorrow. :D

[Financially dependant]

Another good article on gas reserves in Oz.

http://anz.theoildrum.com/node/4094#comments_top

[shasta]

most having a "breather" day as expected really


today on my watchlist only green is MPO

Found a couple of CSG plays kinda under the radar ...

WCL & BUL - worth researching

[mark100]

Found a couple of CSG plays kinda under the radar ...

WCL & BUL - worth researching

http://www.sharetrader.co.nz/showthread.php?t=4674&highlight=wcl

[mark100]

Business Spectator
Alan Kohler: 2P or not 2P?

The game in the coal seam methane gold rush right now is to move gas from 3P to 2P – that is to move resources from “possible” into the “probable” and/or “proven” box by drilling wells and actually seeing what’s down there.

This morning’s announcement from Queensland Gas that it has more than doubled its 3P resources (proven, probable and possible) and increased 2P (proven and probable) by 80 per cent is purely a function of drilling.

QGC has been putting down wells in the Walloon Fairway section of the Surat basin since chairman Bob Bryan founded the company eight years ago and has now drilled 171 kilometres in 264 wells. Another 200 holes are planned for 2008-09.

Managing director Richard Cottee is under pressure to meet the demands of the company’s joint venture with BG Group, in which BG parted with $664 million for 20 per cent of the gas tenements and 10 per cent QGC itself.

That money is for drilling to prove up 7000 petajoules (PJ) of 2P reserves to supply a 3-4 million tonne-a-year LNG plant.

Cottee’s now got the 3P resource up to the 7000 PJ, and 2P is about a third of the way there at 2370 PJ.

At the same time Arrow Energy, Santos, Sunshine Gas, Origin Energy and a rapidly growing host of new opportunists are drilling like mad trying to get Netherland Sewell & Associates (NSAI) – the international reserves certifiers – to give them a tick for a bankable amount of 2P gas.

Banks have traditionally only been prepared to fund 1P gas (that is, proven), while the sharemarket has traditionally paid for 2P.

The wave of big deals that happened recently – BG with QGC, Petronas with Santos and Shell with Arrow – has produced a valuation paradigm shift for 2P gas reserves.

But even so, the pressure is mounting on investors to start valuing, and investing in, 3P gas – simply because of frenetic competition for position in Australia’s new gold rush. Investors are resisting – they generally prefer the probable over the possible in all things.

And in any case, $7 billion LNG projects need the certainty of proven and probable reserves, not just “possible”, so the race is on to get the 2P numbers up and get NSAI’s signature on the certificates.

And then the game will shift to one of raising the capital and finding enough people and material to build four LNG export plants: Santos/Petronas; QGC/BG; Arrow/Shell; Sunshine Gas/Sojitz of Japan.

Actually, there’s no way four will get built – there simply aren’t the people to do it, even if they find the gas and the customers.

The most likely outcome, you would think, is rationalisation, and that’s certainly what the industry is talking about these days, whispering about who’s going to make the first bid.

It should be a very interesting 12 months ahead in the Queensland gas fields, as Santos, Arrow, QGC, Sunshine, Origin and the others jockey for position, and BG, Petronas, Shell and Sojitz pull the strings behind the scenes.

[bermuda]

Business Spectator
Alan Kohler: 2P or not 2P?

The game in the coal seam methane gold rush right now is to move gas from 3P to 2P – that is to move resources from “possible” into the “probable” and/or “proven” box by drilling wells and actually seeing what’s down there.

This morning’s announcement from Queensland Gas that it has more than doubled its 3P resources (proven, probable and possible) and increased 2P (proven and probable) by 80 per cent is purely a function of drilling.

QGC has been putting down wells in the Walloon Fairway section of the Surat basin since chairman Bob Bryan founded the company eight years ago and has now drilled 171 kilometres in 264 wells. Another 200 holes are planned for 2008-09.

Managing director Richard Cottee is under pressure to meet the demands of the company’s joint venture with BG Group, in which BG parted with $664 million for 20 per cent of the gas tenements and 10 per cent QGC itself.

That money is for drilling to prove up 7000 petajoules (PJ) of 2P reserves to supply a 3-4 million tonne-a-year LNG plant.

Cottee’s now got the 3P resource up to the 7000 PJ, and 2P is about a third of the way there at 2370 PJ.

At the same time Arrow Energy, Santos, Sunshine Gas, Origin Energy and a rapidly growing host of new opportunists are drilling like mad trying to get Netherland Sewell & Associates (NSAI) – the international reserves certifiers – to give them a tick for a bankable amount of 2P gas.

Banks have traditionally only been prepared to fund 1P gas (that is, proven), while the sharemarket has traditionally paid for 2P.

The wave of big deals that happened recently – BG with QGC, Petronas with Santos and Shell with Arrow – has produced a valuation paradigm shift for 2P gas reserves.

But even so, the pressure is mounting on investors to start valuing, and investing in, 3P gas – simply because of frenetic competition for position in Australia’s new gold rush. Investors are resisting – they generally prefer the probable over the possible in all things.

And in any case, $7 billion LNG projects need the certainty of proven and probable reserves, not just “possible”, so the race is on to get the 2P numbers up and get NSAI’s signature on the certificates.

And then the game will shift to one of raising the capital and finding enough people and material to build four LNG export plants: Santos/Petronas; QGC/BG; Arrow/Shell; Sunshine Gas/Sojitz of Japan.

Actually, there’s no way four will get built – there simply aren’t the people to do it, even if they find the gas and the customers.

The most likely outcome, you would think, is rationalisation, and that’s certainly what the industry is talking about these days, whispering about who’s going to make the first bid.

It should be a very interesting 12 months ahead in the Queensland gas fields, as Santos, Arrow, QGC, Sunshine, Origin and the others jockey for position, and BG, Petronas, Shell and Sojitz pull the strings behind the scenes.

Yes , a great post. And that is exactly why this bid by QGC (/BG ) for RPM is a sham.

This CSG play is bigger than Texas.

Dont worry RPM shareholders. It aint over yet.

[zorba]

Check out this report on Woodside's view on LNG --- supplies tight beyond 2015.

http://www.bloomberg.com/apps/news?pid=20602099&sid=afWdZhHO3rmA&refer=energy

.

[zorba]

RBA: Aussie commodities and gas to continue in great demand ........

http://www.bloomberg.com/apps/news?pid=20602099&sid=aNlbZHfECSkE&refer=energy

[bermuda]

RBA: Aussie commodities and gas to continue in great demand ........

http://www.bloomberg.com/apps/news?pid=20602099&sid=aNlbZHfECSkE&refer=energy

Hey Zorba,

That's why I sold NZO to get into Coal Seam Gas. Nothing wrong with NZO but CSG,......

Positively brilliant.

[AMR]

CTP is worth a look and a position given its massive ground, history etc
Chasing oil and coal /coal seam gas.

Bought into this as a spec with better than average odds !

Looks like the next Sapex to me too! Now I'm just waiting for QGC to give me 20c per RPM share. I went through their Excellence in O&G presentation and was quite impressed by their CEO.

[tricha]

Have u seen the light at the end of the tunnel yet Huang, be it oil, gas, coal.?


1:21 PM, 24 Jun 2008





Stephen Bartholomeusz

BG's seal of approval





(http://www.businessspectator.com.au/bs.nsf/Article/Out-to-lunch-FVSJB?OpenDocument&src=spb)



It is either self-defeating or tactically astute of BG Group to come back with a hostile $13.8 billion bid for Origin Energy at exactly the same price Origin knocked back less than a month ago.

While BG argues aggressively that the market doesn’t understand the risks in commercialising Origin’s coal seam gas resources or the technical and market risks associated with developing the coal seam gas-fed LNG export facilities, the fact that it has returned underwrites the value of Origin’s strategic position.

If Origin’s CSG reserve position and the issues identified by BG after a "thorough and balanced assessment" of Origin’s prospects are so problematic, why would BG be prepared to put $13.8 billion on the table for the company? BG, of course, may take the view that returning with a higher offer would simply have encouraged Origin and the market to see the offer as a floor for a vault with no ceiling. Tactically, it needs to deflate expectations within a sector where enthusiasm is building at a frenetic rate.

The $13.8 billion or $15.50 a share that BG is offering is, as indicated, the same price that Origin begrudgingly accepted – but then rejected – late last month. That about face was driven by the announcement of Santos’ $US2.5 billion partnership with Malaysia’s Petronas to develop a coal seam gas-fed LNG plant at Gladstone in Queensland. Arrow Energy has subsequently struck its own LNG deal with Shell.

The Santos deal was seen as redefining both the value and the prospects for coal seam gas – Origin has said that the price paid by Petronas would imply a value for Origin’s reserves alone of about $16.5 billion.

BG, of course, disputes that. It says the Santos deal is not a relevant pricing benchmark because Petronas was buying into an established and integrated LNG scheme already under development. Origin’s position would require substantial investment and time to prove up sufficient reserves to support both its domestic gas commitments and an LNG development, and because a significant proportion of the reserves are potentially subject to reversionary rights.

BG and Origin will inevitably argue about the appropriate pricing benchmarks for, and value of, Origin’s reserves and potential reserves, as well as their quantum. What the recent Queensland experience has demonstrated – and the history of Queensland’s coal seam gas sector is very brief – is that the more wells that are drilled the more reserves are proven.

Virtually every time one of the coal seam gas producers makes an announcement they have substantially upgraded their proven, probable and possible reserve positions. Earlier this month Queensland Gas announced it had more than doubled its 3P (proven, probable and possible) reserves and increased its 2P reserves (proven and probable) by 80 per cent. That’s purely a function of drilling more holes.

After the Santos announcement changed the dynamics of Origin’s engagement with BG, Origin’s Grant King has been focused on talking to third parties about ways to monetise Origin’s reserves. King appears less interested in doing a deal like the Santos deal with Petronas, Arrow with Shell or Queensland Gas with BG to jointly develop export LNG facilities than he is in simply selling the gas to an LNG plant operator.

Presumably it would have been open to BG to talk to Origin about contracting its gas. BG has contracts to supply LNG into the Asia Pacific area but no significant reserves. Origin would also be talking to Santos and Petronas about selling its gas into their project. The first LNG facility to be able to source sufficient supply to support two trains will reap very substantial economies.

The challenge for King will be to convince the market and his shareholders that they should, in today’s very difficult market circumstances, turn their backs on $13.8 billion of hard cash and back the as-yet undefined but clearly very sizeable potential of the Queensland gas fields and Origin’s premier position within them.

The market clearly believes coal seam gas-based LNG is both realistic and commercial because all the coal seam gas producers have been very substantially re-rated in the wake of the Santos deal. How much of the Origin share price – which has been trading around 5 per cent above the $15.50 offer price – is due to a fundamental re-rating and how much reflected an expectation that BG would return is, however, unclear.

With a real bid on the table – albeit one that has to get past the Foreign Investment Review Board and the Australian Competition and Consumer Commission, both of which will see the bid as potentially sensitive – the relative merits of cash versus the box will be properly tested.
http://bspecc.iguana2.com/bspectator/stock/ORG (http://marketdata.businessspectator.com.au/?M=stock-quote&Code=ORG) http://bspecc.iguana2.com/bspectator/stock/STO (http://marketdata.businessspectator.com.au/?M=stock-quote&Code=STO)


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[Huang Chung]

Have u seen the light at the end of the tunnel yet Huang, be it oil, gas, coal.?




I see merit in the arguments of the peak oil believers T, but just don't think it's the end of civilisation as we know it. Last time I checked, a litre of petrol was still cheaper than a litre of milk.

I've just started reading Twilight in the Desert, so I'll be interested to see if it colours my thinking.

I'm not anti oil and gas by any means. It just seems there are a lot of mediocre performing companies in that space, and the gems are hard to find. I think if you look at the O&G stocks you've held, you would agree that you've had a few disappointments....GOG & DLS come to mind.

To be honest, I'd be more interested in investing in a global oil and gas investment company....does anyone know if such a beast exists in our market?

I did buy into a parellel theme yesterday T....Neptune Marine (NMS). Definitely worth a look in my opinion, but probably wouldn't make the grade for an oil and gas purist.

Cheers H.C.

[tricha]

I see merit in the arguments of the peak oil believers T, but just don't think it's the end of civilisation as we know it. Last time I checked, a litre of petrol was still cheaper than a litre of milk.

I've just started reading Twilight in the Desert, so I'll be interested to see if it colours my thinking.

I'm not anti oil and gas by any means. It just seems there are a lot of mediocre performing companies in that space, and the gems are hard to find. I think if you look at the O&G stocks you've held, you would agree that you've had a few disappointments....GOG & DLS come to mind.

To be honest, I'd be more interested in investing in a global oil and gas investment company....does anyone know if such a beast exists in our market?

I did buy into a parellel theme yesterday T....Neptune Marine (NMS). Definitely worth a look in my opinion, but probably wouldn't make the grade for an oil and gas purist.

Cheers H.C.

Hi H.C

Oh u r right about the dogs I was in, the list, DLS, GOG, NWE and PEM, CTO and I just got out of GGY with my shirt left on ;)
But if DLS had of come of, I wouldn't have had to work again either.

Hopefully that bad period has been corrected.
I'm being more conservative and have been sticking to produers mainly, instead of maybes.
The likes of ARQ, AZA, AWE, COE, NZO, PPP, PSA

More risk, but bigger reward OEL, ODN and BOW

And the take overs are coming thick and fast.

We shall see when the quarterlys come out, what effect $130 a barrel has on the bottom line of all the oil producers.:D

Thanks for the tip on NMS Huang, I'm sticking to being a purist :eek:

[tricha]

The New $17 Billion Coal Boom

British Gas (LON:BG) staked its claim on the Australian coal-seam gas market earlier this month. The global giant bid AU$13 billion for Origin Energy (ASX:ORG), the frontrunner of coal-gas reserves. This amounted to a 40% premium over Origin's then share price.

With the BG investment in place, there are now 7 companies investing almost $17 billion into making coal-seam gas an export. As soon as 2010, tankers could be lining up in port to sail valuable gas energy to voracious Chinese and Japanese buyers.

Forward-thinking investors, with foresight like Nathan Tinkler, are taking advantage of the situation now. You'd do well to be one of them. We can guide you to the companies best-placed to gain from the new gas age, plus let you in on our number one tip.

But firstly, here's a little background on the unusual business of drilling gas in a coal mine.



Coal Seam Gas: What's the Difference?

Let's clear one thing up. Coal seam gas (also called coal seam methane) is chemically almost identical to natural gas. But there are a few key differences between conventional gas and coal seam gas. You'll see why these are important later on.



Location. You'll find conventional methane trapped in small holes ("pores") in rocks like sandstone and limestone. Coal-seam gas lies in the pores of coal deposits.
Depth. Coal seams are sometimes as close to the surface as 300 metres. Conventional gas typically occurs in similar places as oil, and at similar depths to oil. That means somewhere between 2.5km and 5km below the surface of the earth.
Amount. Coal seams can hold as much as 6 or 7 times as much gas as conventional deposits.
But coal seams have a different character to sandstone or limestone. The pores are often quite small. The larger pores are, the easier it is for liquids and gases to flow through the seam.

So to liberate gas from a coal seam, you have to drill a lot of wells. In America, a typical coal seam well produces anywhere between 100,000 and 500,000 cubic feet of gas per day. Natural gas wells produce more like 1.7 million cubic feet of gas per day. To drill the same amount of gas from a coal seam, you might need 17 times the number of wells.

That doesn't mean that it's less prospective. As we said, coal deposits also tend to hold 6 or 7 times as much gas as an ordinary reserve. It just isn't all in the one place. And it doesn't flow easily.

It should come as no surprise then that, on Australia's east coast, coal-seam gas reserves actually outweigh conventional reserves. Queensland has around 5000 petajoules of "proven" and "probable" gas reserves. Coal-seam gas reserves outnumber conventional reserves 3 to 1.

More importantly, eastern conventional production is in decline. Queensland's conventional gas production peaked in 2004, and has declined 20% since.

If you include "possible" coal seam gas reserves, Queensland has more like 11,000 petajoules of coal gas. It's a huge reserve - perhaps more important than you think - and mostly undeveloped. But that's going to change, starting this year.



The New Gas Market Down Under

That 11,000 petajoule reserve will soon be vital to our gas trade.

Compared to the rest of the world, Australia has always had incredibly cheap gas. There so much of it, and so few of us to buy it. Natural gas futures in New York trade for US$11.44 per contract. Today Australian companies pay between AU$3 and AU$3.50 for an equivalent amount of gas.

A few weeks ago, global energy giant BG caused a bit of a stir when it offered AU$13 billion for energy retailer Origin Energy (ASX:ORG). If the deal happens, it'll be the second biggest Australian takeover of all time. But it's clear what BG's motive was: gain a strategic stake in Australia's coal-seam gas fields.

Why would it want one? Domestic gas demand is growing at 2.6% per year. That's not bad...it means gas demand will have doubled within 25 years. But frankly there's a better opportunity.

Exporting. Why sell gas for $3 if you can get $11 somewhere else?

Given what the global natural gas price has done in the last few years, domestic business is peanuts compared to what gas companies can earn overseas. That amounts to a big exporting incentive.



Coal-Seam LNG Exports: The Numbers
http://www.dailyreckoning.com.au/images/20080625DDA.png


A Small Town with a Huge Future

That incentive has led to four new projects. Four different parties have each proposed LNG exporting plants at the strategic location of Gladstone.

It's a small town on Queensland's coast, near the state's massive coal basin. A pivotal shipping port for years, sending base metals, oil and grains overseas, it'll soon become the backbone of the coal-seam gas industry.

The companies involved in the four projects are willing to spend nearly AU$17 billion, just on the plants. If all goes well the four plants will churn out annual LNG production of up to 10 million tonnes.

Given that east coast gas production is already in decline, we have a problem. If coal-seam gas is leaving our shores, where will we get our domestic gas?

It might simply be a case of paying higher prices. John Durie of The Australian frames the situation well:

"The (Origin-BG) deal will almost single-handedly triple the price of east-coast gas because it will now be priced on an export parity basis. In rough terms, east coast gas wholesales at $3 a gigajoule and, in the west, where Woodside pumps it into Asia, gas costs closer to $9 a gigajoule. If you are BG and able to get $9 a gigajoule from China, that is going to be a lot more promising than $3 to fire some brick plant in Brisbane."

We agree that gas prices probably have to go up.

But even if they don't, coal-seam producers would be the first to enjoy the benefits of higher prices by bypassing domestic markets altogether. Ships sailing out of Gladstone port will make them millions in profit from Australia's new, imported gas prices.

That sounds pretty good. So where exactly is all this methane? And who owns it?



Queensland's Massive Gas Reserves

It's in the same place as the coal. Queensland and New South Wales.

Queensland, as we said earlier, has current reserves of around 11,000 petajoules. But NSW's assets are less advanced. For every cubic foot of gas NSW produced in 2006, Queensland produced six.

The first stage of the coal-seam boom is about Queensland. It's definitely the place to look for a producer.

So now you know where it is, and where's it's going... here's the CSG playing field.



Who Owns Aussie Coal-Seam Gas

Aside from Origin Energy, there are many companies with a chance to make it big in coal seam gas. Here are five of the better Queensland plays, with their vital statistics.

The table can't replace due diligence, and it won't tell you exactly what to invest in. But it should give you a firm grasp of the companies and issues involved.

It ranks the stocks in terms of coal seam gas reserves. There's also the price you have to pay for each petajoule of gas. Santos and Origin have many non-gas operations, so they're up at the expensive end. If you have no energy or gas plays in your portfolio already, you might like to consider them.

But if you're on the lookout for pure exposure to the coal-seam gas boom, the rest of the table is much more interesting.



The Playing Field
http://www.dailyreckoning.com.au/images/20080625DDB.png

Queensland Gas and Arrow Energy have all the pieces of the puzzle. They're both producing, and both command good reserve figures. They each have equity in an LNG project, assuring them access to high overseas gas prices. They have no conventional gas assets - just coal seam.

Their only downside? They're not the cheapest. The last three are more enticing as far as price goes. Sunshine Gas is much cheaper per reserve than the four above it. This discount exists largely because it hasn't produced a wisp of methane to date. If you're not troubled by that, then it has more growth ahead of it than other stocks.

Molopo too, is selling at a bargain price compared to its rivals. But there's no guarantee it'll ever export gas from Australia. It hasn't attached itself to an LNG plant yet, and it produces conventional gas. We included it because it has better diversification than even the larger CSG players. Molopo owns assets in China, the US, Quebec and South Africa. It's the wildcard.

So you have a range of good options. But who do you want on your team? The choice, we feel, is made easier by something we've already mentioned.



Every One of Those Companies Needs This Month's Tip

Remember what we said about coal-seam gas requiring a lot of wells? Santos alone plans to drill a total of 1,350 coal-seam gas wells over the next 20 years, liberating 4,200 petajoules. That's the minimum required to run its Gladstone plant. It'll probably drill more.

That means extracting Queensland's entire gas reserve today will require somewhere in the order of 3,500 wells. It's a hefty job. Plus, reserves will grow. Energy companies don't just sit and twiddle their thumbs.

They prove up energy reserves.

Add in any development of the NSW market, and we could be talking tens of thousands of wells in total. Queensland is already drilling 400 wells a year.



Queensland's Coal-Seam Drilling Frenzy
http://www.dailyreckoning.com.au/images/20080625DDC.png

But looking at the number of wells required doesn't even scratch the surface. Coal gas wells need maintenance. They need geophysical studies before drilling occurs. They need modelling, engineering design, regulatory approval and operating expertise.

The scheme will require its own pipeline system too. Santos and Queensland Gas will need 805 km of new gas pipelines for their contribution to Gladstone.

There's one firm providing all of these services, and more. This is a dynamic company that we believe has all the ingredients to be on the receiving end of the coal seam gas build up.

[airedale]

Tricha, I wonder which engineering company is referred to in the last sentence of your post.

[COLIN]

Tricha, I wonder which engineering company is referred to in the last sentence of your post.


Ah! Thats what you have to pay for!

[tricha]

6:20 AM, 26 Jun 2008 [/URL]

Stephen Bartholomeusz

BG's low-ball bid

[URL="http://www.businessspectator.com.au/bs.nsf/Article/Opes-Primes-unpalatable-rump-FXUHM?OpenDocument&src=spb"]



(javascript:showEmail())



BG Group has timed, and presented, its $13.8 billion hostile bid for Origin Energy to create maximum disruption to Origin’s own plans to monetise its Queensland coal seam gas resources – plans which might otherwise have put Origin beyond BG’s reach.
The way BG presented the offer was uncharacteristically uncivil for a group of BG’s substance, even if one takes into account the history between the two companies, especially Origin’s decision to reject BG’s original approach just 24 hours after agreeing to put it to shareholders.
BG questioned the quality of Origin’s reserves, the methodology used to determine them and the benchmarks Origin used to justify its U-turn on the original approach. It went as close as it could to accusing the Origin board of effectively inflating the reserves and their value to justify the initial rejection. The BG approach was unashamedly aggressive and directed at the Origin board and management.
There are two good reasons why BG would choose to adopt such an approach. One is that it suspects/believes Origin won’t endorse a bid at anything remotely close to the $15.50 a share at which the offer was pitched.
The other is that BG is trying to reach an audience other than the Origin board and its shareholders.
After Santos struck its deal with Petronas for a partnership to exploit Santos’ coal seam gas reserves to develop an export LNG plant at Gladstone – the deal Origin used to explain its change of heart in relation to the initial BG proposal – Origin moved immediately to cash in on the frenzied interest in Queensland’s coal seam gas resources.
It invited expressions of interest from parties with proposals that would commercialise its resources under a formal process that closes on July 4, just over a week away.
BG is very aware of that process. It knew that if Origin were able to close a deal that imputed big numbers to the value of Origin’s gas, its own chances to getting its hands on the gas and Origin’s downstream operations would recede dramatically.
While BG has struck a deal with Queensland Gas that secures some gas supply for its own proposed Gladstone LNG project, there are some doubts over whether QGC has sufficient uncommitted reserves to support a plant of optimum scale.
Equally, BG would ideally not want to allow a global competitor to use Origin’s resources to create yet another competing plant to add to the Santos/Petronas and Arrow Energy/Shell projects.
BG is also looking for regional gas to support the big long-term contracts it has been negotiating in Asia.
The nature of BG’s presentation suggests it is trying to sow doubt in the minds of the prospective Origin partners, causing them to question the credibility and quality of Origin’s resource estimates and the cost and difficulty of commercialising them.
That may not be sufficient to deter them from putting forward proposals – there is a scramble going on, which BG is deeply involved in, to secure access to those coal seam gas reserves – but it might influence (negatively) the value they attribute to them.
The imminent closure of the first phase of Origin’s plans to monetise its coal seam gas also dictated the timing of the announcement of the bid.
Any deal Origin struck that tied up its resources would be a defeating condition for the bid. It might also be regarded as a 'frustrating action', even though Origin started the process before BG announced the bid and had told the market it was expediting a search for its own gas partnership.
If a deal were regarded as a frustrating action – akin to a 'poison pill' – Origin would have to seek shareholder approval for it to proceed. BG would inevitably argue – and take the argument to the Takeovers Panel – that any deal was a frustrating action.
By getting the bid in before Origin could announce any agreement in principle, and before it has even received the expressions of interest, BG has therefore given itself some chance to head off a competitive proposal.
More significantly, it has created the circumstance where any proposal that does emerge – regardless of whether it needs to be put to shareholders – will have to be measured against its own $15.50 a share cash bid.
Origin would need to be able to convince its shareholders that any proposal that sold off or tied up its gas reserves had a real value to shareholders today that, when added to its downstream operations, created more value than BG’s offer.
Whether or not there was a formal requirement to put a counter proposal before shareholders, Origin would also feel under pressure to allow its shareholders to choose between BG and a gas deal. Even if there wasn’t a shareholder meeting, it would probably have to put some kind of independent evaluation of the alternatives to the shareholders.
It would have to do that in the knowledge that BG hasn’t declared its offer final, but could increase the offer in response to any proposed transaction Origin unveils. It would still retain a right of last refusal.
When BG made its initial bid of $15.50 a share it was for an agreed deal and Origin’s support for a scheme of arrangement. The current bid, also at $15.50, was made without an endorsement or any Origin commitment to a scheme and has a minimum acceptance condition of only 50.1 per cent.
Those are pointers to BG’s prospective willingness to pay something more for 100 per cent ownership. They are also indicators of just how much BG wants or needs Origin’s gas. In a perverse way, the ferocity of BG’s approach to the bid suggests a level of desire (if not desperation), that would tend to validate Origin’s view of the strategic worth of its resources to BG and others.
http://bspecc.iguana2.com/bspectator/stock/ORG (http://marketdata.businessspectator.com.au/?M=stock-quote&Code=ORG)

[tricha]

Big energy price increases likely


http://newsimg.bbc.co.uk/media/images/44772000/jpg/_44772159_gashobtwo226jpgi.jpg Talk of 40% price increases has angered many MPs


Big increases in gas and electricity bills are likely this year, leading energy suppliers have confirmed.
Bosses of the big six energy firms have been answering questions about prices from MPs on the parliamentary business and enterprise select committee.
Sam Laidlaw, the chief executive of Centrica, which trades as British Gas, said it was "clear that gas prices are going to have to move up".
Ian Marchant of SSE acknowledged that prices might rise by as much as 40%.
Rupert Steele, director of regulation at Scottish Power, said: "The whole industry figures will have to rise significantly."
Their comments came as MPs on the committee asked them to defend the big increases in gas and electricity prices facing households and businesses in the UK.
"We are seeing a seismic shift in commodity prices," said Dr Paul Golby, chief executive of E.ON.
"It's not difficult to see that the pressure is upwards," he added.
Price pressures
Domestic suppliers are under pressure to explain pricing intentions after the BBC learnt that household energy bills could rise by up to 40% this winter.
http://newsimg.bbc.co.uk/shared/img/o.gifhttp://newsimg.bbc.co.uk/nol/shared/img/v3/start_quote_rb.gif Our absolute price levels are currently the lowest in Europe http://newsimg.bbc.co.uk/nol/shared/img/v3/end_quote_rb.gif


Sam Laidlaw, chief executive, Centrica


Industry sources have suggested households could pay £400 more a year on average for gas and electricity.
"It is easy to see how you get to the BBC's figures," said Mr Steele for Scottish Energy.
The wholesale gas price is closely linked to the price of oil, which itself hit a record high of just under $140 a barrel this month.
Industry research has suggested wholesale gas prices have risen by more than 70% in 2008.
Last month, Centrica - which owns the UK's biggest energy provider, British Gas - signalled that gas prices for customers could increase again later this year.
Bur Mr Laidlaw said: "Our absolute price levels are currently the lowest in Europe."
"As we import more gas from continental Europe, we are having to pay higher prices," he explained.
Both Scottish Power and Scottish and Southern Energy pointed out that they had to buy all their gas on the international markets, as they do not produce any gas or oil in their own businesses.
New power stations
It has been suggested that the energy market is in effect "rigged" by long-term contracts for the supply of gas and electricity involving the big European energy producers, who are accused of excluding any competition that might drive prices down.
http://newsimg.bbc.co.uk/media/images/44772000/jpg/_44772185_centricagetty226jpg.jpg Centrica was among the companies giving evidence to MPs


Vincent DeRivaz, the chief executive of EDF Energy, denied this, although he admitted the markets for wholesale gas and electricity could work better.
"The market can be improved," he said.
"In the gas wholesale market, there is some improvement to be made."
The industry executives surprised some of the MPs by arguing that they needed more financial incentive to invest in building new power stations.
Despite the record high prices of oil, gas and electricity, Andrew Duff, the chief executive of Npower said: "We are in a very difficult transition phase where the forward returns barely cover the cost of the investment."
He explained that his firm would have a negative cash flow for many years to come because of the cost of such expenditure.
Dr Golby, of E.On, pointed out that 60% of UK generating capacity needed to be replaced during the next 20 years.
And Mr Laidlaw said it was not fair for him and his rivals to be described as "fat cats".
"The average profit margin is 3.5% in the industry," he said.
Fuel poverty
MPs also pressed energy chiefs on the extra help being given to low-income and disadvantaged households to help them with the impact of rising bills.
Watchdog Ofgem, which is conducting its own inquiry into the market, outlined plans last month to share data on people on low incomes with energy companies to help people pay their fuel bills.
The proposals, which must be approved by Parliament, are designed to ensure that financial assistance for fuel payments can be better targeted at the elderly and vulnerable.
The government estimates that 2.5 million households are in fuel poverty - defined as when more than 10% of household income is spent on fuel bills - but watchdog Energywatch says the figure is more than four million.
A 40% rise in average fuel bills would be far higher than expected and would put more pressure on homeowners already struggling with higher food and fuel costs.
However, some analysts believe the increases will be closer to 25%.
It is thought that any price announcements are most likely to come in August, when energy bills are not at the forefront of people's minds. But there is a great reluctance in the industry to be the first to reveal a big rise, so the rises may be unveiled in stages. The chief executives of Centrica, Scottish & Southern Energy, NPower, EDF Energy and E.ON UK attended the meeting, while Scottish Power was also represented.

[Huang Chung]

Tricha, I wonder which engineering company is referred to in the last sentence of your post.

I how little doubt they're talking about AJ Lucas (AJL) Airedale. Been watching them for a while and nearly bought some today, but ended up buying Industrea (IDL) instead.

[Crypto Crude]

Hello CSG stock holders and followers...
This Thread has gone quiet?
I was thinking of how to describe the CSG sector and the Word Bubble came to mind... I looked it up in the online dictionary and it came up with many definitions including
inflated speculation, esp. if fraudulent: The real-estate bubble ruined many investors and
So I thought that was the wrong word to use... Instead, I will use the word Oversold...:)....
ICN, 41c -> 19c
VPE 32c-> 21c
BOW 56c-> 33c
AOE $4.08-> $3.12
WCL 76c-> 57c
SHG $2.82 ->$2
Bul 42c -> 25c
and shasta said ESG over 90c -> 58c
...
This is really getting sold down, some of these stocks are getting close to what they were before this really took off... its time to start thinking about getting back into this sector, or respositoning yourself over the next few weeks as I believe this will fly again... The markets have really dampened things though, and will continue to do so....
Markets are close to a rally, (maybe 3-5% on the DOW further to go)...
At this stage im only holding RPM, and CTP, and LMP with CSG interests...
all are doing ok...
:)
.^sc

[Dr_Who]

I am keeping a very close eye and ready to pounce when the price hit rock bottom. :)

[bermuda]

I am keeping a very close eye and ready to pounce when the price hit rock bottom. :)

British Gas has sure got itself into a real dilemma. It needs a huge amount of gas to meet their Singapore gas commitment but cant get it from Origin .

Never sell your house before you have a new one under contract. Their offer for Origin was far too low.

This is going to be one hell of a fight.

Watch out for a lot of resurgence in this sector. And dont forget the Indians are doing due diligence and are meant to strike in October. BG had better hurry up or be curried up.

[Crypto Crude]

bermuda-BG had better hurry up or be curried up.
Haha... yes, or else they will get turned into butter chicken

http://tbn0.google.com/images?q=tbn:PMZ7VM0B92kJ::http://www.historyforkids.org/learn/economy/pictures/chicken.jpg (http://www.historyforkids.org/learn/economy/pictures/chicken.jpg)
..........^ BG
Yes India Coming is very good news...
Its not if, its when this sector will re-explode...
:cool:
.^sc

[Dr_Who]

All CSG stocks are getting body slammed by a 200kg bear. I wanted to pick up some more VPE at 22 cents today, but got cold fingers and couldnt hit the buy button.

[JackSprat]

Hello CSG stock holders and followers...
This Thread has gone quiet?
I was thinking of how to describe the CSG sector and the Word Bubble came to mind... I looked it up in the online dictionary and it came up with many definitions including
So I thought that was the wrong word to use... Instead, I will use the word Oversold...:)....
ICN, 41c -> 19c
VPE 32c-> 21c
BOW 56c-> 33c
AOE $4.08-> $3.12
WCL 76c-> 57c
SHG $2.82 ->$2
Bul 42c -> 25c
and shasta said ESG over 90c -> 58c


This is really getting sold down, some of these stocks are getting close to what they were before this really took off... its time to start thinking about getting back into this sector, or respositoning yourself over the next few weeks as I believe this will fly again... The markets have really dampened things though, and will continue to do so....
Markets are close to a rally, (maybe 3-5% on the DOW further to go)...
At this stage im only holding RPM, and CTP, and LMP with CSG interests...
all are doing ok...
:)
.^sc

Shrewdy this CSG forum is like doing a 101 in gas (esp with Tricha's contributions). I think your picks for drops simply reflects the market sentiment overall. I mean BOW for eg; was down in the mid teens a few weeks ago so even 33c is pretty good and it'll only take the word from Ben and his men for everyone to get their grins back for another round which I think will continue to happen until tyhe whole shebang folds completely.

[STRAT]

Hello CSG stock holders and followers...
This Thread has gone quiet?
I was thinking of how to describe the CSG sector and the Word Bubble came to mind... I looked it up in the online dictionary and it came up with many definitions including
So I thought that was the wrong word to use... Instead, I will use the word Oversold...:)....
ICN, 41c -> 19c
VPE 32c-> 21c
BOW 56c-> 33c
AOE $4.08-> $3.12
WCL 76c-> 57c
SHG $2.82 ->$2
Bul 42c -> 25c
and shasta said ESG over 90c -> 58c
...
This is really getting sold down, some of these stocks are getting close to what they were before this really took off... its time to start thinking about getting back into this sector, or respositoning yourself over the next few weeks as I believe this will fly again... The markets have really dampened things though, and will continue to do so....
Markets are close to a rally, (maybe 3-5% on the DOW further to go)...
At this stage im only holding RPM, and CTP, and LMP with CSG interests...
all are doing ok...
:)
.^scGot my eye on CTP and CTPO Shrewdy :D

[Crypto Crude]

strat,
wait until after Blamore,
im also very interested in BUL... If that one came down to the right price Id sell anything to buy Blue... (same with VPEO).... some masked warrior is holding VPEO up artifically... I have my suspicions on who that is...;)
I got one third out of CTPOA yesterday at 14.5c for another position elsewhere (sold at a small loss)... my other risky option play has fallen more since then..... haha...
I wont disclose it, its the cheapest CSG stock on the entire market... its also the riskiest...
I wont disclose it because I dont want others to think that Im tipping it as a buy...Id do just the same if I bought URA...(id be pretty quiet if I bought Ura)...
apart from my small sell down on CTPOA , im holding CTP, and the rest of CTPOA all the way, because ive earnt one big gamble... and I will easily make it all back on the CSG if results come up good and anywhere near 70 TCF comes to fruition....
high on my list to buy in the CSG world would be VPEO, BUL, ICN...
RPM is also a good one, it has virtually no downside, and big up...

ICN is more advanced than Roma, and has a bigger resource......
:cool:
.^sc

[Huang Chung]

Has anyone read anything about doubts about CSG being suitable for conversion to LNG. I've heard there was something in one of the papers a few weeks ago, but haven't been able to track anything down. I think the comment might have come from some consultant (to Woodside??).

Can anyone shed any light on this?

[Huang Chung]

Has anyone read anything about doubts about CSG being suitable for conversion to LNG. I've heard there was something in one of the papers a few weeks ago, but haven't been able to track anything down. I think the comment might have come from some consultant (to Woodside??).

Can anyone shed any light on this?

Think I've found it....not a big deal by the looks of things.

http://www.theaustralian.news.com.au/story/0,25197,23891958-643,00.html

[Financially dependant]

Has anyone read anything about doubts about CSG being suitable for conversion to LNG. I've heard there was something in one of the papers a few weeks ago, but haven't been able to track anything down. I think the comment might have come from some consultant (to Woodside??).

Can anyone shed any light on this?

CSG to LNG in progress

http://www.epa.gov/cmop/docs/cmm_conference_apr05/ray_zahradnik.pdf

[Huang Chung]

CSG to LNG in progress

http://www.epa.gov/cmop/docs/cmm_conference_apr05/ray_zahradnik.pdf

Thanks for that Fd.

[STRAT]

...Id do just the same if I bought URA...(id be pretty quiet if I bought Ura)...

:cool:
.^scLOL, you certainly wouldnt select it for any comp then :D

I see the Speculator is holding CTP:eek:

[mark100]

If conversion of CSG to LNG was not technically or financially possible I don't think we would have seen BG, Petronas and Shell all stumping up significant amounts of cash to back the idea.

Looks like the scramble for reserves/acreage is just warming up with BOW now wanting in on the party. This is the exact reason Cottee from QGC has been trying to talk things down in my view

[Dr_Who]

I think QGC will use this weak market conditions as an opportunity to accummulate all the small CSG companies at a discount.

[drillfix]

I wont disclose it because I dont want others to think that Im tipping it as a buy...Id do just the same if I bought URA...(id be pretty quiet if I bought Ura)...

:cool:
.^sc

Ahh Haaa,

Do I detect a Closet URAN investor here SC...:eek:LOL

You can be open here, plenty of them out there~! :D

[Dr_Who]

Makes me laugh to watch BG play the media and talk down CSG potential. If it is true that he says CSG is a dotcom, then why would BG prepare to gamble $13.8 billion? This guy sounds like McDunk on NZO.

Time for BG to stop all the BS and pay up... LOL

http://www.theaustralian.news.com.au/story/0,25197,24001162-5005200,00.html

[Financially dependant]

Makes me laugh to watch BG play the media and talk down CSG potential. If it is true that he says CSG is a dotcom, then why would BG prepare to gamble $13.8 billion? This guy sounds like McDunk on NZO.

Time for BG to stop all the BS and pay up... LOL

http://www.theaustralian.news.com.au/story/0,25197,24001162-5005200,00.html

All news is good news, as long as they spell your name right!

The DOW finishing in the green, oil and gas up over night, RPM, BOW bids and lots of hot air from BG in the media might mean a nice CSG rally today:)!

[tricha]

6:17 AM, 11 Jul 2008 [/URL]
(javascript:favoris())

[URL="javascript:showEmail()"] (javascript: window.print();)


Stephen Bartholomeusz

Sound and fury





(http://www.businessspectator.com.au/bs.nsf/Article/NABs-imperfect-match-GF4HZ?OpenDocument&src=spb)



When Origin Energy’s ordinary shareholders open BG Group’s target statement for its $13.8 billion bid for their company they eyes will probably be glazed and their minds numbed.

The highly complex discussions of reversionary rights, the status and levels of coal seam gas reserves, the comparisons with other coal seam gas deals and the economics of LNG plants and the technical and financial risks of developing them are interesting, but they don’t, and can’t, resolve the competing arguments between BG and Origin.

Origin’s shareholders, happily, don’t actually have to worry about trying to decide themselves who is to be believed, but can sit back and allow events to inform them.

At the moment BG is effectively underwriting a $15.50 a share value for Origin – although the underwriting is highly conditional and reliant on obtaining approval from the Australian Competition and Consumer Commission and the Foreign Investment Review Board.

We know Origin is worth more than $15.50 a share to BG because it wouldn’t have made the offer if it didn’t see more than $15.50 a share of value for its own shareholders.

We also know that it considered all the negative issues it has raised in the bidder’s statement – including the issue of reversionary rights (the rights of third parties to reclaim interests in Origin acreage after it has recovered its costs under a formula that includes an undisclosed ‘uplift’ factor) – not once, but twice.

The first was when it decided to increase its initial proposed offer price from $14.70 to $15.50 a share in May after being informed of a substantial increase in Origin’s coal seam gas resource base. The second, after a lot more consideration and investigation of the issues it is now highlighting, was when it announced its hostile bid on June 24.

BG is one of the world’s largest gas groups. Because of its joint venture with Queensland Gas Company it also has a privileged insight into Queensland’s coal seam gas sector and some of Origin’s key acreage. It is as informed as anyone outside Origin could be of the value of its coal seam gas interests, the big swing factor in any valuation of the Australian group.

That makes $15.50 a share a pretty good baseline for Origin’s value.

The great thing for Origin shareholders is that they don’t have to rely on their board or management’s view that the $15.50 isn’t a sufficient price.

Origin has embarked on a process of inviting expressions of interest from parties interested in helping it to ‘monetise’ its coal seam resources. The initial part of that process ended last week. Now Origin has to turn the interest into a developed deal.

Either that process produces a deal with a third party that establishes a value for those resources, or it doesn’t. If it doesn’t, Origin almost inevitably falls to BG and the only questionmark is whether the company can prise anything more from the bidder in exchange for a recommendation.

If it does, Origin knows that the deal has to not only stand up to fierce scrutiny from BG and the market, but has to impute a value to its coal seam resource that demonstrates very clearly – indeed, unquestionably – that the BG offer is materially inadequate. If it doesn’t, Origin will fall to BG.

The very nature of the options for monetising coal seam gas says that any deal would have to be with a very large industry player or group of players – a company or companies with equivalent credibility and technical expertise to BG. If Origin lands one or more of BG’s peers, it would undermine some of BG’s attacks on Origin’s financial and technical capacity to properly exploit its resources.

The fact that the board embarked on the process suggests it is confident the process will end with a big bang and not the whimpering sound they would otherwise be making as they sidled, humiliated, from the boardroom. They know, moreover, that any deal that would have to stand up against the prospect of an increase in the BG bid – it effectively has an option to respond to whatever Origin can put on the table.

Thus, all the rhetoric that will flow from the two camps in the meantime is just so much noise. The contest, and the bid, will only come to life towards its end and only after Origin has or hasn’t unveiled a counter-proposal that blows BG away.
http://bspecc.iguana2.com/bspectator/stock/ORG (http://marketdata.businessspectator.com.au/?M=stock-quote&Code=ORG)

[Brut]

Interesting Article in "The Australian today"

Shell sees no problem in dealing with concerns over coal seam gas July 19, 2008
FOREIGN investors appetite for investments in coal seam gas and Australian companies with exposure to the new energy product shows no signs of slowing.

Royal Dutch Shell's global head of power and gas, Linda Cook yesterday said the super major was still looking for new CSG openings in Australia to add to its recently added stake in Arrow Energy.

"We've had that (CSG) on our radar for some years," Ms Cook said during a visit to Australia.

"Our interest remains high in various types of new gas opportunities including tight gas as well as coal seam gas in a number of countries around the world."

Last month, Shell became the third major to join Gladstone's rapidly evolving LNG industry, striking a $776 million deal to buy into Arrow Energy's resources, a deal that includes its existing sales contracts, and 10 per cent of its suite of prospects in India, Vietnam and China.

Ms Cook said Shell had finalised the deal with Arrow over other players in the domestic CSG market because of its asset appeal and knowledge base.

"Arrow had some interesting assets and some good expertise and would be an attractive partner for us internationally," Ms Cook said.

That deal, alongside Santos's $2.5 billion sale of CSG reserves to Malaysia's Petronas and BG hostile takeover bid for Origin Energy, pushed a significant re-evaluation of stocks with CSG exposure.

Ms Cook said CSG was a resource that Shell was "excited (to) have a position not just in Australia but also in China".

"With increased demand for energy, and the environmental benefits of natural gas, we should look for all sources of natural gas and CSG is one of those," she said.

Despite widespread enthusiasm for CSG, Woodside boss Don Voelte dismissed it as a "lousy quality gas at liquefied form" and suggested that the Japanese market would not want it.

"I can't comment on Don's views on the whole matter but we have looked at it and we see no technical barriers to using CSG to supply an LNG plant and we think the concerns that customers have can be dealt with," she said.

On Wednesday, Shell bolstered its position in Canada's oil and gas industry with the pound stg. 2.9 billion ($5.9 billion) acquisition of Duvernay Oil, which has exposure to so-called "tight gas", a form of natural gas that is difficult to extract and is found in less permeable rock structures than conventional gas.

[bermuda]

Thanks Brut,
Someone on CNBC said last Monday that the Origin Ghairman had flown to London the week before to have talks with BP and/or Shell.

Now the Japanese have taken a further interest and the Indians are preparing.

And BG still havent secured the gas that they must have.

India is screaming for LNG and so is the world. Just watch how the price of LNG increases.

And last week the Govt ticked off one of the LNG projects at Gladstone.

This is some big poker game. Thanks for your post about Shell's interest in CSG.

[JackSprat]

Thanks Brut,
Someone on CNBC said last Monday that the Origin Ghairman had flown to London the week before to have talks with BP and/or Shell.

Now the Japanese have taken a further interest and the Indians are preparing.

And BG still havent secured the gas that they must have.

India is screaming for LNG and so is the world. Just watch how the price of LNG increases.

And last week the Govt ticked off one of the LNG projects at Gladstone.

This is some big poker game. Thanks for your post about Shell's interest in CSG.

This was quite evident today on sky news where the price of gas in Britain had doubled since 2004 and they were struggling to find where future supplies were going to come from??

[shasta]

US waste companies develop world’s largest landfill gas-to-LNG facility
Source: Business Wire
Published May 5, 2008

Collecting garbage and recyclables in California is about to get a lot cleaner, thanks to a joint venture between Linde North America and Waste Management (NYSE:WMI) that will create the world’s largest facility to convert landfill gas into clean vehicle fuel. Waste Management, North America’s largest waste management company, and Linde North America – part of The Linde Group, a leading global gases and engineering company, this week announced a joint venture to build a liquefied natural gas (LNG) facility, located at the Altamont Landfill near Livermore, California to convert landfill gas into a clean vehicle fuel. The project offers a unique opportunity to “close the loop” by fueling hundreds of collection trucks with clean fuel produced from garbage.

The companies will partner to install systems to purify and liquefy the landfill gas Waste Management collects from the natural decomposition of organic waste in the landfill. When the facility begins operating in 2009 it is expected to produce up to 13,000 gallons a day of LNG.

Pat Murphy, president of Linde North America, said, “Linde and Waste Management are joining together to clean up our environment by capturing and reusing landfill gas for vehicle fueling, and reducing greenhouse gas emissions by more than 30,000 tons per year. Linde is using its expertise in designing and developing LNG plants around the world to create a clean and sustainable energy solution for the residents of California.”

Duane Woods, senior vice president of Waste Management, said, “This project has the potential to allow us to tap into a valuable source of clean energy while greatly reducing our dependence on fossil fuels. This will be the largest plant of its kind and we hope to break new ground by producing commercial quantities. Natural gas is already the cleanest burning fuel available for our collection trucks, and the opportunity to use recovered landfill gas offers enormous environmental benefits to the communities we serve.”

The $15.5 million Waste Management-Linde project will receive grant assistance from the California Integrated Waste Management Board, the California Air Resources Board, and the South Coast Air Quality Management District.

Linda Adams, secretary of the California Environmental Protection Agency, calls the project a “very significant step towards helping meet Governor Schwarzenegger’s new, low-carbon fuel standard. The LNG produced from the Altamont landfill gas will be a virtually zero-carbon transportation fuel. This is a key milestone in helping us develop the facilities needed to produce more than 200 million gallons of clean transportation fuel each year from the garbage in California’s landfills.”

Linde is focused on finding ways to reduce our dependence on fossil fuels and our emission of greenhouse gases by developing alternative energy solutions. These include alternative energy technologies using hydrogen, biogas, LNG and other sustainable replacements for gasoline, diesel and other oil products. Around the world, Linde provides technical solutions for the processing, transportation and storage of LNG and biogas, ranging from one of the world’s largest LNG plants in Hammerfest, Norway, to biogas fueling stations for drivers in Sweden.

Waste Management is a founding member of the Chicago Climate Exchange and the first solid waste company to join the California Climate Action Registry. In 2003, the company committed to reducing greenhouse gas emissions through increased recycling, the use of alternative transportation fuels, and the beneficial use of landfill gas. This project is also part of the company’s environmental sustainability initiative to double its waste-based energy production from the equivalent of 1 million to 2 million homes each year by 2020 as well as directing capital spending of up to $500 million per annum over a 10-year period to increase the fuel efficiency of its fleet by 15 percent and reduce fleet emissions by 15 percent by 2020 as well as investments in new technologies to enhance its business.

Underdog

If your interested in landfill gas, check out my VIR thread...:)

[bermuda]

This doesnt read too well eh?

The Govt. will have to do a rethink.

[tricha]

Underdog

If your interested in landfill gas, check out my VIR thread...:)

Are u sure u did not mean the SSG , its a nice piece of work.:rolleyes:

[bermuda]

Hi Underdig,
What a fantastic report . Thank you for posting it. I have sped read it and will return to digest it fully.

I read about 4 months ago I read that Petronet were going to do due diligence on the Queensland CSG sector and make an investment decision sometime around October.

I saw a report on India's LNG demand recently and they have a 50% shortfall they need to address.

Thanks again for your news and views. Plenty more action to come. Hope the ETS doesnt knock it around.

[bermuda]

Im still digesting it! and rereading it, there are so many good related articles.

so many on my watchlist are sitting on support, a bit of consolidation and something like the Indian news will set it off again


I have picked up PES (Pure Energy) have major ground but I dont think they are big enough yet.

however, Petronet stated the possibility of more than just one play
they have very good locations and good relationship with Arrow

they are picking up the ground just northeast of Lacerta.



just trying to think how they might go...choices are narrowing for the big boys

Pure now only $100m MC and looking for 300PJ of 2P over next 12 months.
conservatively should value them at $750m!

There are a number of opportunities.
I like your reference to Arrow and Petronet. Imagine that. Arrow could take a bigger share of BOW and BOW could takeover RPM and then takeover VPE. But it is all second guessing.

But something is going to happen to shake this thing up again.

What will BG do to get their share?

And Origin are reportedly talking to BP and or Shell.

Petronet will be looking at something pretty big I would think.

Pure could be the one. Sherholder Matthews has plenty.

[yogi-in-oz]

:)

Hi folks,

Here's a quick overview of time cycle analysis on some
of the CSG players, over the next few months:

BUL ... August /September 2008 ... 3 minor and positive cycles

06-19112008 ... 3 significant and positive cycles

05-09122008 ... 2 minor and positive cycles here

-----

PES ... August 2008 ... 3 significant and positive cycles

September/October 2008 ... 3 significant and negative cycles expected

January 2009 ... significant and negative news expected

-----

ICN ... September/October 2008 ... 4 significant and positive cycles

January 2009 ... significant and negative cycle expected

-----

GPP ..... August 2008 ..... 3 significant and positive time cycles

22-29122008 ..... significant and positive cycle expected

have a great day

paul

:)

=====

[lewinsky]

Thanks for the report UnderDOG.
Any discussion on gas plays has to include Molopo.
Their holdings in Quebec are worth a close look and based on BP's recent purchase from Chesapeake Oil underpins the share price at over $1.50. Then add on Queensland and you have the potential of a big rerating.
Keep an eye on this.

[bermuda]

Thanks for the report UnderDOG.
Any discussion on gas plays has to include Molopo.
Their holdings in Quebec are worth a close look and based on BP's recent purchase from Chesapeake Oil underpins the share price at over $1.50. Then add on Queensland and you have the potential of a big rerating.
Keep an eye on this.

Yes, had a very good look at that today. Used to work for BP and they dont pull out 900 million pounds for nothing. They seem to know the American geology pretty well.

MPO look very good.

[mark100]

On the topic of LNG being affected by the governments bs green paper here is a quote from a Wilson HTM report. Apparently CSG contains much lower CO2 quantities than conventional natural gas (ie North West shelf gas). Also at some stage the government will wake up to the fact that the whole of life emmissions from LNG (from production, to conversion to burning) are much lower than mining coal and burning it, despite the LNG conversion process being energy intensive

'The Federal governments green paper released on Wednesday included
details of the proposed carbon emissions trading scheme. LNG projects
which contain high CO2 levels in their gas fields face potential economic
disadvantages compared to fields with low CO2 levels such as CSG LNG.'

[AMR]

On the topic of LNG being affected by the governments bs green paper here is a quote from a Wilson HTM report. Apparently CSG contains much lower CO2 quantities than conventional natural gas (ie North West shelf gas). Also at some stage the government will wake up to the fact that the whole of life emmissions from LNG (from production, to conversion to burning) are much lower than mining coal and burning it, despite the LNG conversion process being energy intensive

'The Federal governments green paper released on Wednesday included
details of the proposed carbon emissions trading scheme. LNG projects
which contain high CO2 levels in their gas fields face potential economic
disadvantages compared to fields with low CO2 levels such as CSG LNG.'

It really depends on the coal quality. Some poor-quality coals can produce gas with large proportions of carbon dioxide. I haven't read that much but I think Queensland coal and northern territory coals (in CTP's tenement anyway) are very low in co2.

[mark100]

It really depends on the coal quality. Some poor-quality coals can produce gas with large proportions of carbon dioxide. I haven't read that much but I think Queensland coal and northern territory coals (in CTP's tenement anyway) are very low in co2.

QLD CSG contains around 3% CO2 I read somewhere which is apparently quite low

[AMR]

Come on you guys. We all know Coal Seam gas is a myth thought up by a retired old fart who still believes in Santa!

LOL

CSG has been used succesfully in the US for a while now, it accounts for some 20% of their total gas use.

[zorba]

.

Sux is a Troll -- and a waste of space.

[bermuda]

On the topic of LNG being affected by the governments bs green paper here is a quote from a Wilson HTM report. Apparently CSG contains much lower CO2 quantities than conventional natural gas (ie North West shelf gas). Also at some stage the government will wake up to the fact that the whole of life emmissions from LNG (from production, to conversion to burning) are much lower than mining coal and burning it, despite the LNG conversion process being energy intensive

'The Federal governments green paper released on Wednesday included
details of the proposed carbon emissions trading scheme. LNG projects
which contain high CO2 levels in their gas fields face potential economic
disadvantages compared to fields with low CO2 levels such as CSG LNG.'

Thanks Mark, I always knew that CSG had a low CO2 content but this is the first time that I realized it was below the Govt Standards. This is good news. No wonder Voelte from Woodside is screaming (offshore high CO2 ) and Cottee from QGC is smiling. ( onshore low CO2)

Lots to come in this story. Very interesting. Would be a good live story to study at a University course.

I was a bit worried about this but your news is good news for Queensland CSG'ers.

[mark100]

I see the opposition aren't going to support Kevin Dudds proposed carbon tax scheme in its present form which means it won't get through the senate. One of the issues the opposition have is with LNG not being exempted.

What a retarded Prime Minister Australia has right now. Penalise LNG projects that are going to provide a cleaner source of fuel to Asia. If we don't sell them LNG they will either get it elsewhere or burn coal. Either way it does nothing to reduce global emmisions and in many cases sends the projects overseas with Australia missing out on the jobs and money.

Take your pick for a name - Kevin Dudd, KRudd, Kevin07 Recession08 - they all apply

[Lebowski]

Origin races for deal to foil BGFont Size: Decrease Increase Print Page: Print Adele Ferguson and Rowan Callick | July 25, 2008
THE race is on for Origin Energy to strike a deal with one of 10 parties believed to be conducting due diligence on its coal seam methane assets, in a move that would either derail BG Group's $15.50-a-share hostile takeover offer or force it to increase its bid to more than $16.50.

Origin is believed to have culled a list of 10 interested parties down to three as it moves closer to finding a suitable joint venture partner to take a stake in its CSM assets in Queensland, and jointly develop a liquefied natural gas project to export gas.

Speculation was rife yesterday that China's Citic Resources Holdings was considering offering up to $US10 billion for Origin's CSM assets to shore up gas supplies over the next decade.

The rumours sent the share price 11c higher to $16.13 -- well in excess of the $15.50 takeover offer for the entire group by Britain's BG.

However, reports from Dow Jones in Hong Kong last night quoted sources close to Citic as saying the group was "not at all" interested in the coal-gas assets of Origin.

The market is speculating that the other interested parties include international oil giant Royal Dutch Shell, BP, Japan-based Osaka Gas, which has taken an interest in one of Nexus's projects, and at least one Chinese operator.

Origin shareholders are becoming increasingly confident that BG will have to increase its offer if it wants to win control and tap into Origin's CSM reserves and convert it to LNG.

It could certainly afford a higher offer after yesterday posting a 58.6 per cent rise in net profit for the second quarter of 2008 due to stronger margins at its LNG business and higher overall energy prices and production volumes.

BG chief executive Frank Chapman said in a statement: "I am delighted to report that BG Group has delivered another strong business performance and continues to create material value through our exploration program."

Global gas prices have risen sharply in the past 12 months in line with soaring oil prices, and there has been strong demand for LNG cargoes on short-term markets. The front-month gas contract in Britain, where BG has significant gas production, has more than doubled in value in the past year.

In the US, where BG supplies LNG, front-month natural gas futures have risen by more than two-thirds.

In a report yesterday, the South China Morning Post said: "Should Origin seal a deal with Citic Resources or one of the other interested parties, the plan is to go to shareholders with the idea of a piecemeal break-up

of the company that would hopefully generate more cash than a one-off sale."

Citic refused to comment on the speculation. However, the price seems excessive on the basis that it would put a value on Origin's 3P assets at 90c to $1 a gigajoule -- which is well in excess of the value that Petronas placed on Santos's reserves and would reinforce China's desperation to get a seat in the LNG action.

Origin recently opened up a data room for interested parties to make preliminary offers for all or part of its CSM assets, in an attempt to monetise the assets and find a suitable partner to help it develop an LNG plant in Gladstone, Queensland. If Origin can find the right joint venture partner, it will either derail BG's $15.50-a-share hostile takeover bid for Origin or force it to increase its offer by at least $2 a share.

Wilson HTM senior resources analyst John Young said there were now six LNG plant proposals in Queensland.

"There are credible industry players that have not yet taken a position, such as Osaka Gas, that are interested, and there are those that want to take a bigger position, including Shell and BG," Mr Young said. "We are at the start of realising a significant export-oriented industry that will supply energy to the region for decades."

[Trent]

From the Australian
Good news for the CSG sector?

Power plants in danger from emission tradings schemeFont Size: Decrease Increase Print Page: Print Lenore Taylor, National correspondent | July 25, 2008
FOUR out of five power stations in Victoria's Latrobe Valley, both coal-fired power stations in South Australia and several generators in NSW and Queensland could close down under an emissions trading regime designed to meet even a modest greenhouse reduction target.

New modelling for the electricity industry finds that Australia could achieve cuts of 10 or 20 per cent in its greenhouse gas emissions by 2020 compared with 2000 levels - but only after a massive upheaval in the energy sector.

Even the lower target of a 10 per cent cut would push the price of carbon emissions to levels that would close down 15 per cent of the nation's electricity generating capacity on the east coast and require $33billion in new investment in replacement clean energy generation, such as wind, solar, combined cycle gas turbine and geothermal power.

A 10per cent reduction target would result in a carbon price rising to $45 a tonne by 2020, the modelling found, pushing domestic power bills up by 24per cent, or an average of $250 a year.

A 20per cent target would take the carbon price to $55 a tonne and push power bills up by 28per cent.

Under an ETS, companies and industries that could not meet emissions-reduction targets - and were not exempt - would be forced to buy permits to continue polluting. Labor wants to create an ETS by 2010 but has not yet set the emissions targets that will underpin it.

The Energy Supply Association of Australia says the modelling, which it commissioned from analysis firm ACIL Tasman, proves the need for the Government to support players in the energy sector because it asks them to finance billions of dollars in new investment at the same time as government decision-making means existing plants are closed down early.

"If the Government goes down this path, then it is vital that it offers support to recognise the impact on asset values so that investors can make new investments in cleaner generating capacity with confidence," ESAA chief executive Brad Page said.

The Government's climate change adviser, Ross Garnaut, argued against any compensation to the electricity sector under an ETS.

But the Government's green paper on an ETS, released last week, acknowledged the need for "a limited amount of direct assistance to existing coal-fired electricity generators to ameliorate the risk of adversely affecting the investment environment".

The green paper says it would deliver this assistance through a new fund - called the Electricity Sector Adjustment Scheme - but gives no indication of how much money could be set aside in it. It also promises "structural adjustment" money to help workers and communities in hard-hit regions.

Yesterday, Kevin Rudd reassured the LNG industry that the ETS would not threaten billions of dollars in new investments in the sector, saying he was "confident there is a way forward".

The Government has announced a long-term target of a 60 per cent cut in greenhouse emissions by 2050, but it is waiting for detailed Treasury modelling before committing to an interim target for 2020. A 10 per cent cut would be at the lower end of expectations for a 2020 target, even taking into account government assurances that an ETS will be brought in gently.

The ESAA modelling confirms Victoria's Latrobe Valley will be by far the hardest hit by the new carbon price, with the Loy Yang B, Hazelwood, Yallourn and Morwell power stations likely to close and only the Loy Yang A to continue in operation.

South Australia would lose both its coal-fired power stations - Playford and Northern. NSW, which is in the process of trying to privatise its electricity generation, would lose Redbank in the Hunter Valley, with Lidell under threat if the emissions-reduction target was set at 20 per cent.

Queensland would lose the Collinsville station near Mackay, Callide B near Biloela and, under the 20 per cent target, also Comalco's Gladstone plant.

The modelling also shows that the wholesale price of power would rise steeply to meet the 10 per cent target, with the increased costs varying greatly between states depending on the extent to which they have to rebuild their generating capacity.

In Tasmania, with its hydro generation capacity, the wholesale power price is predicted to increase by 25 per cent, but in Victoria the hikes could be up to 55 per cent, under a 10 per cent reduction. In South Australia prices would rise 35 per cent, Queensland by 50 per cent and NSW by 52 per cent.

The ESSA modelling says the federal Government will also need to invest at least $4.5billion in extra transmission lines to remote locations, where wind and geothermal power is generated, and in new gas pipelines.

T

[bermuda]

Trent and Lebowski,
Many thanks for those reports.

The CSG bubble got carried away a bit but now it is set to reinflate. This is a brilliant short term, medium term and longterm story.

BG must be getting awfully worried about Origin trying to pull another partner. This has got really good implications for all the Queensland CSG players.

There is a lot happening in the background and we should see some decent action in the next few months. That's why I am holding onto all my CSG shares. Some of them are due for Certification later this year which will see excellent gains on some really depressed prices.

Such a good story. Cant think of a better one.

[tricha]

Think Coal Seam is down and out, think carefully, theres a curveball coming ;)



Chesapeake’s Shale Gas Plays Pay Big Dividends

By Andrew K. Burger
21 Jul 2008 at 05:42 AM GMT-04:00
Moving early and fast into unconventional U.S. shale gas plays is paying big dividends for Chesapeake Energy Corp. and its shareholders. Management last week announced a $1.75 billion asset sale with BP, part of a shift in management’s strategic plans.
</B>CADIZ, SPAIN (ResourceInvestor.com) -- BP America Inc. (BP) and Chesapeake Energy Corp. (CHK)--the largest and third-largest natural gas explorer-producers in the U.S. respectively, on July 17, announced that the former has agreed to acquire all the latter’s leasehold interests in Arkoma Basin-Woodford Shale- some 90,000 net acres- for $1.75 billion in cash (http://phx.corporate-ir.net/phoenix.zhtml?c=104617&p=irol-newsArticle&ID=1176363).
The deal illustrates the growing attractiveness and rapidly increasing value of unconventional shale gas resources, resources that Chesapeake’s management has been at the head of the pack in recognizing and exploiting, particularly given oil prices approaching $150/barrel and the increasing probability that some form of price will be put on CO2 emissions in the U.S.
Selling its Arkoma Basin-Woodford Shale leaseholds in Oklahoma to BP is the most recent example of Chesapeake management following through on its stated strategy of monetizing more mature assets. It is looking to strike similar joint venture (JV) deals for its Fayetteville Shale and Marcellus Shale properties, where it has acquired and is developing substantial oil and gas leasehold properties.
Strategic Shift
On July 1, Chesapeake announced a JV deal with Plains Exploration & Production (NYSE:PXP) that it expects will be the first in a series of JV partnerships aimed at generating cash flow that will enable it develop its prospective resources (http://investor.plainsxp.com/phoenix.zhtml?c=132091&p=irol-newsArticle&ID=1171283).
Plains is purchasing a 20% interest in Chesapeake’s Haynesville leaseholds in Louisiana for $1.65 billion cash-on-the-barrel, with another $1.65 billion to be paid over the next few years to fund half of Chesapeake’s 80% share of drilling costs, more than enough to cover Chesapeake’s $2.5 billion research and acquisition costs. Chesapeake will be the JV’s operating partner.
The price Plains is paying for its stake in the JV implies a value of $16.5 billion for Chesapeake’s Haynesville leaseholds.
In a July 2 analyst-update, CEO Aubrey McClendon explained how the JV marks a strategic shift for the company that entails acquiring dominant land positions in new discoveries, then selling minority stakes to produce immediate cash returns to shareholders, fund development and acquire new prospects.
JVs, VPPs & New Acquisitions
Management is looking to do the same for with its increasingly valuable unconventional shale gas assets in Arkansas’ Fayetteville Shale and Pennsylvania’s Marcellus Shale, which management expects will generate an additional $4.5-5.0 billion this year. Two horizontal wells have been drilled in Marcellus shale acreage with estimated recovery of 4.0 billion cubic feet equivalent per well. Two wells are currently in operation and plans are to increase that up to as many as 15 by the end of 2010.
It also expects to generate some $1.25 billion this year through its Volumetric Production Payment Program, $650 million through VPP #3, which it is currently marketing. Property sales and hedging to secure high profit margins are the other two legs of a business strategy management has been able to deliver on exceedingly well.
On the acquisition side, Chesapeake on July closed on a deal with Goodrich Petroleum Corp. (GDP) in which it has paid $178 million for the deep rights to 10,250 net acres of Haynesville Shale oil and gas leasehold in northern Louisiana.
The deal gives Chesapeake a 20% working interest in approximately 25,000 net acres in the Bethany-Longstreet field and a 50% interest in approximately 10,500 net acres in the Longwood field, according to a company media release (http://phoenix.corporate-ir.net/phoenix.zhtml?c=83169&p=irol-newsArticle&ID=1175475).
Horizontal drilling is expected to begin in Q3 with one dedicated rig and a second to be added during Q4.
Building a Dominant Position in Unconventional Shale Gas
A vertically integrated, natural-gas exploration-and-production company, Chesapeake’s management recognized earlier than most that conditions were auspicious for exploring and developing unconventional natural-gas resources and it has followed through by assembling a large and diversified producing and prospective resource base spanning 14.0 million net acres, effectively using new exploration-and-drilling techniques and technology and astutely managing its leasehold inventory and finances, all of which has borne fruit in recent years and leaves the company well-positioned for the future.
The U.S.' third-largest natural gas producer - and largest in terms of drilling, with 154 operated and 91 non-operated rigs - Chesapeake increased production 23% in 2007, to 2.0 billion cubic feet equivalent per day- the highest growth rate among large cap U.S. producers. Management projects 20-22% increases in 2008 and 18-20% in 2009 and 2010.
Company-estimated proven reserves were 11.5 tcfe as of March 31; and it aims to reach a target proven reserve level of 13 tcfe by yearend 2008 and approximately 15 tcfe by end 2009.
Its 14 million net acres of onshore oil-and-gas leaseholds, together with 20 million acres of 3D seismic data, give it the largest U.S. inventory.
Hot Properties
Ninety-two percent of Chesapeake’s 2.2 billion cubic feet equivalent per day of producing wells, prior to the BP deal, is natural gas, and the vast bulk of that comes from unconventional shale-gas deposits that were considered unfeasible not that long ago. In addition, the company had some 11.5 trillion cubic feet equivalent of proved reserves (94% natural gas) and 49 tcfe of risked unproved reserves.
Developing its Haynesville and Marcellus Shale leaseholds - covering some 440,000 net acres after the Plains purchase – is on management’s front burner. Chesapeake remains the single largest oil and gas leaseholder of Haynesville Shale properties even after selling Plains 110,000 acres.
Evaluating prospects on its Haynesville properties for nearly two years now- since Q3 ’06- leads management to believe it may be Chesapeake’s largest gas discovery to date, and one of the largest in the U.S. Management believes that 4.5-8.5 bcfe per well can be recovered in the core area of the field based on drilling results.
Four vertical and eight horizontal wells have been drilled. Initial production rates for the former have ranged from 5-15 mmcfe/day on restricted chokes at flowing casing pressures of up to 6,500 PSI.
Hitting On All Cylinders
Successful development of shale gas prospects in the Fort Worth Barnett shale catalyzed activity in unconventional natural gas resource space and Chesapeake has been a part of that.
Chesapeake expects to hold leaseholds covering 250,000 net acres in Johnson, Tarrant and Dallas counties by year-end 2008 and some 280,000 net acres by year-end 2009.
Management in its July 2008 presentation notes that leasehold prices in the Tarrant County area have doubled or tripled this year, as have Fayetteville Shale leasehold prices. The company is still acquiring leaseholds in both areas nonetheless as returns are proving to be exceptional given sustained high oil and gas prices coupled with technology and operational improvements and lower operating costs. Management plans to increase its rig count in Fayetteville, from 14 to 25 by the end of this year and recovery rates are expected to improve 10% to 2.2 bcfe per well.
Chesapeake has an equity value of $39 billion, with $16-billion in net long-term debt and working capital deficit, giving it an enterprise value of $55 billion. Management forecasts $6.1 billion in EBITDA, operating cash flow of $5.6 billion and net income to common shares of $2.0 billion for 2008, and $7.6 billion, $7.1 billion and $2.6 billion, respectively, in 2009.
Company stock is up some 66% this year, 97% since Jan. 1, 2006 and 320% since January 1, 2005. In its 15-year its stock has increased 48-fold, the second-best performance among large oil and gas explorer/producers during that period. Its workforce has grown 13-fold in 10 years, to 6,900.
On July 9, management announced pricing of a 25-million offering of common shares at $57.25 per share. Underwriters including book runners Lehman Bros., UBS, ABN Amro, Bank of America Securities LLC and Wells Fargo Securities have been granted a 30-day purchase option for a maximum 3.75 million additional shares (http://phx.corporate-ir.net/phoenix.zhtml?c=104617&p=irol-newsArticle&ID=1173384).
Management plans to use the proceeds to temporarily repay outstanding debt on its revolving credit facility and for general corporate purposes.

And if u think T\A will predict it, forget it.

[Financially dependant]

Think Coal Seam is down and out, think carefully, theres a curveball coming ;)



Chesapeake’s Shale Gas Plays Pay Big Dividends

[/FONT]


In a peak oil scenario we need all the energy we can get! Tight, shale or coal seam gas it does not matter.

From a financial perspective it is timing energy to the market at the appropriate demand level!

[CAM]

Shell and BP join pursuit of Origin Energy

http://www.stuff.co.nz/4642584a13.html

[Financially dependant]

Shell and BP join pursuit of Origin Energy

http://www.stuff.co.nz/4642584a13.html

Thanks Cam, that is good to see. This should see another around of bargaining with plenty of media speculation! All good for the share prices:)!

[tricha]

Stocks
The next hot spot for resources and stocks set to thrive
Jan McCallum - August 04, 2008

http://www.compareshares.com.au/images/home_content/oil_industry.jpg Coal seam gas was barely talked about 10 years ago but a combination of rising gas prices globally and demand from Asia means it is going to be a hot spot for the resources sector in coming years.

Energy-hungry Asian markets are the prize that has drawn Shell, BP, Britain’s BG and Petronas of Malaysia into Australia’s growing coal seam gas business and seen stock prices jump as the industry is re-rated.

Most of the activity in coal seam gas (CSG), also known as coal bed methane and coal seam methane, is in Queensland, where government policy has encouraged the industry. CSG now supplies 30% of the state’s gas from the Bowen and Surat Basins but much of the forecast growth is directed at processing CSG into liquefied natural gas (LNG) at Gladstone and shipping it north. Asian consumers are paying around $14 a gigajoule for LNG, compared with $2.50 - $2.70 for sales in Australia.

&lta href="http://g.adspeed.net/ad.php?do=clk&ampzid=12959&ampwd=300&ampht=250&amppair=as" target="_top"&gt&ltimg style="border:0px;" src="http://g.adspeed.net/ad.php?do=img&ampzid=12959&ampwd=300&ampht=250&amppair=as" alt="" width="300" height="250" &gt&lt/a&gtEL & C Baillieu estimates the export market out of Gladstone could be worth $100 billion by 2013 if all the five LNG plants planned and being built there are in production. Head of research, Ivor Ries, says the global market for gas is growing and rising prices will flow through to the domestic market, giving all producers a lift.

Ries says the global gas market is rising by 3 – 3.5% a year “which does not sound like much but the volume of that is extraordinary, trillions of cubic feet. “At the same time, a lot of the old fields around the world are in decline, particularly in North America.”

He has a buy recommendation on Molopo, which produces from Queensland’s Mungi field, describing it as “asset rich” from its holdings in Australia, South Africa, China, the US and Canada. The company has an exceptional amount of territory and it is good acreage, says Ries.

He also likes the bigger players, even though CSG is a small part of their portfolios. Ries says Santos has significant reserves to supply its proposed Gladstone plant, which has the potential to be a goldmine. He says there is not much risk in Santos when its share price is under $18.

John Young, senior resources analyst at Wilson HTM, also likes Molopo, saying the geographic diversity of its acreage stands out, along with its project timeline. “They have a pipeline of projects at various stages of maturity, you can see how the company will grow over a period of time.”

Wilson HTM, which focuses on the mid-cap sector, has buy recommendations on Molopo, Queensland Gas Corp (QGC), Arrow Energy and Sunshine Gas.Young says they are all quality companies with viable business plans which they are actively executing.

He says the industry is in for an exciting time. “We are really just at the start of it. We have seen the interest of a number of international energy companies who have invested significant amounts of capital here. We will see this industry continue to grow very strongly.”

Origin Energy is Australia’s largest CSG producer and used an increase in its CSG reserves as a reason for rejecting BG’s takeover offer in May. Origin said two important developments factored into the rejection were an increase in its CSG reserves of 3P (proven, probable and possible) gas by 121%, and Petronas paying $US2.5 billion for 40% of Santos’ LNG plant in Gladstone. Origin said its reserve increase gave it the largest CSG reserves and contingent resources in the country and the Santos announcement established a “new and higher benchmark for the value of CSG.”

Apart from the Santos-Petronas plant, BG has signed a deal with QGC to develop an $8 billion LNG export market out of Gladstone. Other companies planning LNG plants there include Sunshine Gas, which has signed a heads of agreement with Japanese trading house Sojitz, and LNG Impel, a subsidiary of the Canadian company Galveston LNG.

Arrow Energy has signed a heads of agreement with LNG Ltd to develop an LNG plant at Gladstone. Arrow produces more than 20% of Queensland’s total gas and in June Shell bought 30% of its Australian tenements for $776 million. Shell will supply expertise and research facilities to Arrow.

CSG production in New South Wales is also growing although so far seems focused on the domestic market. Eastern Star supplies a power station from the Gunnedah Basin in and Sydney Gas supplies AGL from the Sydney Basin.

The re-rating of CSG is prompting major exploration work and raising reserves.Queensland Gas announced in June an 80% rise in its Surat Basin 2P “proved and probable” reserves. Metgasco this month increased its reserves in the Clarence Moreton basin, saying it now had the largest 2P gas reserves in NSW and planned to supply electricity generators in northern NSW and Queensland, where there was an opportunity to plug some of the last energy market gaps on the east coast. Molopo is looking at delivering gas to Newcastle from its reserves in the Gloucester Basin.

The domestic market will get a boost from the Federal Government’s carbon tax scheme, which will provide a real incentive to generate electricity from gas, and from higher prices globally flowing onto Australia. CSG occurs naturally and is the gas that causes coal mine explosions. Miners have to remove methane but it adds to greenhouse gases when vented from mines so there are environmental benefits in capturing and using CSG.

Questions for investors include whether an area being explored will contain CSG, whether it can be extracted commercially, and its proximity to pipelines. Producers typically have to drill 200 – 1,000 metres for supply. Large amounts of water are pumped out of the gas seams and there can be issues around disposing of waste water and concern about salt water contaminating water tables.

Company debt levels and access to funds are going to be important given the funding requirements of some of the planned projects, however the smaller players are showing they can attract partners with deep pockets if they can prove up reserves. The demand for gas is such that if they cannot develop their projects, it seems likely that someone else will.

[ELYOB]

BPT : BIG announcement CSG puts this company in the big league . Must make a deal with Shell I recon . Got NET 2P 450PJ and NET 3P of 1TCF approx . BPT has production and is building on this on a ramp-up to an expanding pwoer station

[Dr_Who]

BPT : BIG announcement CSG puts this company in the big league . Must make a deal with Shell I recon . Got NET 2P 450PJ and NET 3P of 1TCF approx . BPT has production and is building on this on a ramp-up to an expanding pwoer station

What is this compare to QGC?

[AMR]

What is this compare to QGC?

QGC has 2.4TCF under 2P as of their last update. These things change quickly though, it only takes a few drills to prove up reserves. QGC's reserves were up 80% on last quarter.

[Dr_Who]

QGC has 2.4TCF under 2P as of their last update. These things change quickly though, it only takes a few drills to prove up reserves. QGC's reserves were up 80% on last quarter.

AMR are you buying any BPT? It is tempting, I cant decide.

[POSSUM THE CAT]

Market does not seem to like the BPT announcement. Price on the way down again now

[Dr_Who]

Market does not seem to like the BPT announcement. Price on the way down again now

The whole oil sector is down with expectations that oil price may go down further. If the oil sector was not so weak, I would not hesitate to pick up some BPT.

[AMR]

AMR are you buying any BPT? It is tempting, I cant decide.

It's the same problem for me, oil broke a support last night. Nothing wrong with waiting a few days in the current climate for oilers, and selling seems to have picked up a bit.

[mark100]

LNG From Coal-Seam Gas Problems Are `Overstated,' JPMorgan Says

By Angela Macdonald-Smith

Aug. 6 (Bloomberg) -- The technical challenges of producing liquefied natural gas from coal-seam methane have been ``overstated'' and LNG projects based on that process have benefits over some conventional ones, JPMorgan Chase & Co. said.

None of the issues that are typically raised as potential obstacles for producing LNG from coal-seam methane, as proposed by five rival ventures in Australia, are ``showstoppers,'' JPMorgan said in an Aug. 4 report. Santos Ltd. and Queensland Gas Co., two stocks involved in such projects, are being undervalued, it said.

No LNG projects have been built based on coal-seam methane, or CSM, rather than conventional natural gas. Such ventures will involve drilling many times more wells than typical LNG projects, while the wells will produce large volumes of dirty water requiring disposal. Coal-seam methane also contains no gas liquids to help boost profitability, while the LNG will have a lower energy value.

``While we recognize that any LNG project will be challenging, we see some of these CSM-specific issues raised as spurious,'' JPMorgan analysts led by Sydney-based Mark Greenwood said in the report. ``We are comfortable that QGC and Santos have solutions for the genuine challenges associated with these projects.''

Adelaide-based Santos and Malaysia's Petroliam Nasional Bhd. are planning a A$7.7 billion ($7.1 billion) LNG project near Gladstone in Queensland state, while Queensland Gas is partnering BG Group Plc in a larger project that may cost as much as A$14 billion. Royal Dutch Shell Plc, Arrow Energy Ltd. and Sunshine Gas Ltd. are among other companies planning LNG projects in Queensland using coal-seam gas.

`Thousands of Wells'

Don Voelte, chief executive officer of Woodside Petroleum Ltd., told the Australian Broadcasting Corp. last month there were ``a lot of issues'' connected with building LNG projects based on coal-seam gas. Woodside is operator of the North West Shelf venture, Australia's biggest LNG producer, and doesn't have any investments in coal-seam gas.

``It takes literally thousands of wells,'' Voelte said on the Lateline Business program. ``It's a low-quality gas. We've looked at it. We have an opinion about it and we're pretty happy with our gas.''

While it's true that coal-seam gas-based LNG projects will require many wells, those ventures will still have a lower capital cost per ton of LNG capacity and per trillion cubic feet of reserves produced, JPMorgan said. It estimated the ``life- cycle capex'' for Woodside's proposed Pluto LNG project at A$2.80 per million cubic feet of gas, compared with A$2 for the BG-Queensland Gas project and A$2.16 for the Santos-Petronas project.

Higher Returns

Estimated rates of return from the coal-seam gas-based projects exceed those from Woodside's initial Pluto production unit even in the absence of condensates in the gas, JPMorgan said. That's partly because, as onshore projects, they will benefit from a ``relatively benign'' royalty system compared with the conventional LNG projects off the northwest coast, it said.

JPMorgan calculates that Queensland Gas shares are trading at a 47 percent discount to its discounted cash flow valuation of A$8.75 a share. Santos is trading at a 45 percent discount, it said. Perth-based Woodside and Port Moresby-based Oil Search Ltd., a partner in a proposed conventional LNG project in Papua New Guinea, are trading at smaller discounts to valuations, it said.

[Huang Chung]

Thanks for that Mark. This is the issue I was referring to in a much easier post.

I'm also wondering about the impact of widespread CSG production on the water table. This could be an issue in Qld, where water is often scarce these days, and graziers use bore water on their properties. Not sure if it is issue in these areas, but sometimes when the water table drops, salt rises to the surface, which is a problem for the farmers.

Naturally, all the water they bring up will have to be productively used, probably by shire councils, industry etc, but I do wonder if there might be growing opposition from the land owners if they start seeing negative impacts from CSG production on their lands :confused:.

[Financially dependant]

Thanks for that Mark. This is the issue I was referring to in a much easier post.

I'm also wondering about the impact of widespread CSG production on the water table. This could be an issue in Qld, where water is often scarce these days, and graziers use bore water on their properties. Not sure if it is issue in these areas, but sometimes when the water table drops, salt rises to the surface, which is a problem for the farmers.

Naturally, all the water they bring up will have to be productively used, probably by shire councils, industry etc, but I do wonder if there might be growing opposition from the land owners if they start seeing negative impacts from CSG production on their lands :confused:.

The water issue does seam like a double edged sword, but in an area suffering with drought it can become a valuable commodity. The quality of the water and location being important to assess the amount of treatment it requires before it can be irrigated on to farm land or used as town drinking water.

I also see that the Queensland Government has more faith in CSG then Coal to liquids (like me:))
http://www.theaustralian.news.com.au/story/0,25197,24139444-5005200,00.html

[Huang Chung]

F.D.

Found this......

http://www.dme.qld.gov.au/zone_files/None_Zoned_Files/csg_water_m_s_final_12.pdf

[Financially dependant]

F.D.

Found this......

http://www.dme.qld.gov.au/zone_files/None_Zoned_Files/csg_water_m_s_final_12.pdf

Thanks H.C.

Looks like a case by case (or well by well) assessment is required. I would have thought there was plenty of UV's floating around for sterilization!

[Trent]

LNG From Coal-Seam Gas Problems Are `Overstated,' JPMorgan Says

By Angela Macdonald-Smith

Aug. 6 (Bloomberg) -- The technical challenges of producing liquefied natural gas from coal-seam methane have been ``overstated'' and LNG projects based on that process have benefits over some conventional ones, JPMorgan Chase & Co. said.

None of the issues that are typically raised as potential obstacles for producing LNG from coal-seam methane, as proposed by five rival ventures in Australia, are ``showstoppers,'' JPMorgan said in an Aug. 4 report. Santos Ltd. and Queensland Gas Co., two stocks involved in such projects, are being undervalued, it said.

No LNG projects have been built based on coal-seam methane, or CSM, rather than conventional natural gas. Such ventures will involve drilling many times more wells than typical LNG projects, while the wells will produce large volumes of dirty water requiring disposal. Coal-seam methane also contains no gas liquids to help boost profitability, while the LNG will have a lower energy value.

``While we recognize that any LNG project will be challenging, we see some of these CSM-specific issues raised as spurious,'' JPMorgan analysts led by Sydney-based Mark Greenwood said in the report. ``We are comfortable that QGC and Santos have solutions for the genuine challenges associated with these projects.''

Adelaide-based Santos and Malaysia's Petroliam Nasional Bhd. are planning a A$7.7 billion ($7.1 billion) LNG project near Gladstone in Queensland state, while Queensland Gas is partnering BG Group Plc in a larger project that may cost as much as A$14 billion. Royal Dutch Shell Plc, Arrow Energy Ltd. and Sunshine Gas Ltd. are among other companies planning LNG projects in Queensland using coal-seam gas.

`Thousands of Wells'

Don Voelte, chief executive officer of Woodside Petroleum Ltd., told the Australian Broadcasting Corp. last month there were ``a lot of issues'' connected with building LNG projects based on coal-seam gas. Woodside is operator of the North West Shelf venture, Australia's biggest LNG producer, and doesn't have any investments in coal-seam gas.

``It takes literally thousands of wells,'' Voelte said on the Lateline Business program. ``It's a low-quality gas. We've looked at it. We have an opinion about it and we're pretty happy with our gas.''

While it's true that coal-seam gas-based LNG projects will require many wells, those ventures will still have a lower capital cost per ton of LNG capacity and per trillion cubic feet of reserves produced, JPMorgan said. It estimated the ``life- cycle capex'' for Woodside's proposed Pluto LNG project at A$2.80 per million cubic feet of gas, compared with A$2 for the BG-Queensland Gas project and A$2.16 for the Santos-Petronas project.

Higher Returns

Estimated rates of return from the coal-seam gas-based projects exceed those from Woodside's initial Pluto production unit even in the absence of condensates in the gas, JPMorgan said. That's partly because, as onshore projects, they will benefit from a ``relatively benign'' royalty system compared with the conventional LNG projects off the northwest coast, it said.

JPMorgan calculates that Queensland Gas shares are trading at a 47 percent discount to its discounted cash flow valuation of A$8.75 a share. Santos is trading at a 45 percent discount, it said. Perth-based Woodside and Port Moresby-based Oil Search Ltd., a partner in a proposed conventional LNG project in Papua New Guinea, are trading at smaller discounts to valuations, it said.


Post very useful - thanks Mark100
T

[Trent]

First talk of a natural gas glut in the US. Aussie exporters may yet have to share the Asian/Europe market with US exports.
T


Natural-Gas Firms Seek
Outlet for Growing Supplies
Industry Tries to Lift
Demand to Keep
Production Strong
By BEN CASSELMAN
August 11, 2008; Page A4

As major oil companies search for more oil to meet growing global demand, U.S. natural-gas companies face the opposite problem: what to do with all the gas they soon will be producing.

U.S. natural-gas production is soaring, thanks to high energy prices and new technologies that have unlocked reserves considered too difficult or expensive to tap in earlier eras. Production is up 8% this year, according to government data, and the growth is expected to continue as companies drill thousands of wells in Texas, Louisiana and Oklahoma, and look at massive new reserves in Appalachia and Canada.

Demand is growing, too, but more slowly. Total U.S. natural-gas consumption is up 5.5% this year through May, spurred largely by a gradual shift from coal power plants to cleaner-burning gas-fired ones. Consumption actually fell slightly between 2003 and 2006.

As some analysts have begun to toss around terms like "gas glut," natural-gas futures have tumbled 9.2% in the past two weeks, and they have brought producers' stocks down with them. Shares of large natural-gas producers Chesapeake Energy Corp., XTO Energy Inc. and EOG Resources Inc. are all down 30% or more from their recent highs in late June and early July. By comparison, oil-focused Exxon Mobil Corp. is down 17% from its recent high May 20.

"I think that supply growth has become the 800-pound gorilla in the North American gas investing equation," said Dan Pickering of Tudor Pickering Holt & Co., an energy-focused investment bank.

For consumers, increased supplies of natural gas could mean lower heating and cooling bills, as the fuel generates a fifth of the nation's electricity and heats half of the U.S.'s homes. But any relief is likely to be limited. Analysts say that if natural-gas prices settle below $8 per million British thermal units, producers will cut back production -- which will tighten supplies and drive prices up again.

"It'll be essentially a self-correcting mechanism," EOG Chief Executive Mark Papa said.

Cutbacks in production could spell trouble for producers and their investors. Unlike Big Oil, most independent producers aren't using their cash to buy back stock or pay big dividends. They have been plowing it back into drilling, because Wall Street values the companies on their growth potential. If lower prices force producers to slow their drilling, their growth will slow, too.

To prevent that, the industry in recent months has cranked up its lobbying to boost long-term demand for natural gas. In television ads and congressional testimony, the industry has been touting natural gas as cheaper than oil, cleaner than coal and domestically produced.

"Find me the congressman or find me the policy maker who's against cleaner energy, cheaper energy and American energy," Chesapeake Chief Executive Aubrey McClendon said in an interview.

Mr. McClendon, whose company expects to become the nation's top natural-gas producer by the end of the year, has been especially aggressive. Late last month he lobbied Washington lawmakers to promote compressed natural gas as an alternative to gasoline.

In an interview, Mr. McClendon said he wants to make lawmakers and the public aware of the potential for natural gas. But, he added, "You can only produce what the market wants ... We're not going to expand if the market for that expansion isn't there."

Other producers acknowledge they are concerned about supply outstripping demand. EOG's Mr. Papa said that if recent discoveries prove as successful as companies expect, the industry will need to promote natural gas for both power generation and transportation.

"It's going to change the dynamics of the gas markets," Mr. Papa said.

The new supplies could pose problems for importers of liquefied natural gas. U.S. LNG imports are down two-thirds from last year because higher prices in Asia and Europe have attracted shipments to those markets. If new U.S. production keeps prices comparatively low, LNG imports are unlikely to rise.

The U.S. natural-gas industry has a history of booms and busts. Last fall, producers cut back production when predictions of a warm winter drove prices to below $6 per million BTUs.

But experts say the current situation is different. Instead of a single big discovery or a weather-related demand slump leading to a temporary rise in supplies, the industry has found a completely new resource -- shale -- that could last decades.

Shale -- or dense rock formations that are common in many parts of the country and around the world -- has long been known to hold natural gas. But production was impractical because the rock isn't porous enough for the gas to flow.

In the 1990s, however, companies figured out how to crack the shale using pressurized water, releasing the gas. They perfected the technique in the Barnett Shale, a massive shale-gas field around Fort Worth, Texas, that now produces about four billion cubic feet per day of natural gas, 6.5% of total U.S. production and quadruple what it produced in 2004.

The success of the Barnett set off a frantic search for new shale fields, some of them staggeringly large. The recently discovered Haynesville Shale in northwest Louisiana and East Texas has by some estimates 250 trillion cubic feet of recoverable gas, five times as much gas as the Barnett. The massive Marcellus Shale formation in Appalachia could be bigger still. Together, U.S. shale plays could hold as much as 840 trillion cubic feet of gas by one industry estimate -- the equivalent of more than 140 billion barrels of oil, more than half the proven reserves of Saudi Arabia.

It is still early, and the actual amounts produced could be lower. Nor will all that gas be available right away. Producing it will require drilling tens of thousands of wells at a cost of billions of dollars. Limited availability of drilling rigs, oil-field workers and pipeline capacity, as well as environmental and regulatory constraints, will restrict how fast production can grow.

But the recent discoveries have put natural-gas producers in a fundamentally different position from their oil-producing peers. Many gas producers are promising double-digit production growth next year. Meanwhile, Chevron Corp. saw production decline 3.4%, and Exxon's oil production fell 2% in the second quarter from a year earlier, excluding unusual disruptions.

"There's very little doubt that you can bring this much gas supply on. The reserves are there," Credit-Suisse analyst Jon Wolff said. "The issue is, does that amount of gas push the price down?"

[AMR]

Not too great for the CSG industry as a whole if the leader QGC snaps a trendline is it?
http://www.sharetrader.co.nz/picture.php?albumid=5&pictureid=38

[Dr_Who]

AMR can you describe what that graph means? I am not a TA/graph person, so dont understand all these lines.

[AMR]

AMR can you describe what that graph means? I am not a TA/graph person, so dont understand all these lines.

Simply indicates a change in momentum or deceleration. In simple terms in means the price is no longer rising at the same rate.

[Trent]

We do indeed live in interesting times... What implications for QGC (and VPE - gas sales to QGC) if BG has to sell down its QGC interests
T


BG Group, the British gas producer bidding $13.8 billion for Australia's Origin Energy, may have to sell its Queensland Gas Company assets to win the competition watchdog's approval, Credit Suisse says.

BG may also consider giving up an arrangement with QGC for the joint marketing of natural gas in Australia to secure clearance from the Australian Competition and Consumer Commission for the offer for Sydney-based Origin, Credit Suisse says in a report.

The ACCC said on July 11 that it had requested further information from BG over its intention to buy Origin and dropped a planned August 20 date for announcing whether to allow the purchase.

Buying Origin would give BG, which owns a 20 per cent stake QGC gas fields, ownership of Australia's biggest coal-seam gas producer.

"While we believe potential ACCC issues can be resolved, they may come at a price to BG and possibly to QGC, if BG has to exit its 20 per cent stake in QGC's tenements," Credit Suisse analysts, led by Sydney-based Sandra McCullagh, said.

"All this spells delay or an adverse finding by the ACCC, with BG forced to go back to the ACCC with its solution."

Origin gained 15c yesterday, or 1 per cent, to $16 in Sydney trading. The shares have traded above BG's $15.50 offer since the bid was made, indicating some investors expect a higher price.

BG owns a 9.9 per cent stake in QGC and the two companies plan to develop an $8 billion liquefied natural gas project.

On June 25, the ACCC invited comments from interested parties on BG and QGC plans to jointly market gas into the local market before the LNG plant starts up, given BG's bid for Origin. Credit Suisse retained a $20 target price for Origin shares and its "outperform" recommendation.

It maintained a $6.10 target price for QGC shares, which closed yesterday at $4.34 in Sydney, up 3c.

Bloomberg

[STRAT]

Not too great for the CSG industry as a whole if the leader QGC snaps a trendline is it?
http://www.sharetrader.co.nz/picture.php?albumid=5&pictureid=38Hi AMR,
Its been a pretty grim month all round for the energy sector and I suspect the break through the trend line may not have occured otherwize. What concerns me is that If QGC has their eye on VPE they will be well aware that they can make a killing with good timing. Im guessing as soon as clear short term bottom has occured they will make a play :rolleyes:

Could be uglier than the RPM offer:eek::(

[bermuda]

The CSG balloon is starting to reinflate. SHG's trading halt will be interesting..ORG are playing hardball with BG...and why not...their assets will appreciate strongly over the next few years as Asian demand and the price of LNG goes higher.

This is all going to happen. And the Indians havent played their cards yet. And they really need this LNG.

Be not afraid...get back into CSG. There are some rich pickings to be had..

[drillfix]

Be not afraid...get back into CSG. There are some rich pickings to be had..

Hi Bermuda,

Can you elaborate with some examples of these rich pickings please?

Cheers~!

[bermuda]

Hi Bermuda,

Can you elaborate with some examples of these rich pickings please?

Cheers~!

Hi there,
As you know the CSG bubble got really pricked with the declining oil price talk and in hindsight I should have seen the BG bid for ORG as one of the greatest moments to sell.

But muggins me held on because I like the longterm story. There are lots of CSG plays. Pick the ones with Major LNG connections.

I hold BOW, VPE, VPEO and RPM. But hey there are a lot of others that will claw their way back.

There is a lot of activity coming up which will revitalise this sector.

[drillfix]

Hi there,
As you know the CSG bubble got really pricked with the declining oil price talk and in hindsight I should have seen the BG bid for ORG as one of the greatest moments to sell.

But muggins me held on because I like the longterm story. There are lots of CSG plays. Pick the ones with Major LNG connections.

I hold BOW, VPE, VPEO and RPM. But hey there are a lot of others that will claw their way back.

There is a lot of activity coming up which will revitalise this sector.

Cheers Bermuda, and watch out for them longterm stories ;)

[trackers]

Poland seeks LNG port as fast as possible


News wires




Poland's government supported the construction of the liquefied natural gas (LNG) port on the Baltic coast as a strategic investment in the country's drive for energy supplies diversification.

Poland uses around 14 billion cubic metres of gas every year but produces only about one-third of the amount and almost half of its gas import come from Russia.
To diversify the country's gas supplies, Polish gas monopoly PGNiG signed a few deals that could allow it to import gas from other countries and is in works to construct the LNG terminal in northern city of Swinoujscie.
"The LNG terminal, as a strategic investment, should start operating as soon as possible," a government statement said.
Earlier, PGNiG said the terminal would take around 2.5 billion cubic metres annually and cost 440 billion euro (US$648 billion), said Reuters.
Later the company said, however, the port could be more expensive.


http://www.upstreamonline.com/live/article161359.ece

[Financially dependant]

So the CSM sector hots up again, about time IMO!

QGC offer for SHG has been excepted by SHG board and a major shareholder (just like the RPM play), they are getting good at this.

So with SHG 30,000sqkm acreage gives QGC a massive area to draw CSG from, you can add RPM's area and proberly VPE's also. So this leads me to believe that BG group does not need Origin any longer they can get there gas from QGC (now has 7000PJ of 3P reserves) alone.

Here is a video from QGC chief about the take over.

http://www.investortv.com/company/QGC_20-08-2008-1210.html

And another good source of info..

http://www.theaustralian.news.com.au/story/0,25197,24214905-5005200,00.html

your thoughts??

[STRAT]

So the CSM sector hots up again, about time IMO!

QGC offer for SHG has been excepted by SHG board and a major shareholder (just like the RPM play), they are getting good at this.

So with SHG 30,000sqkm acreage gives QGC a massive area to draw CSG from, you can add RPM's area and proberly VPE's also. So this leads me to believe that BG group does not need Origin any longer they can get there gas from QGC (now has 7000PJ of 3P reserves) alone.

Here is a video from QGC chief about the take over.

http://www.investortv.com/company/QGC_20-08-2008-1210.html

And another good source of info..

http://www.theaustralian.news.com.au/story/0,25197,24214905-5005200,00.html

your thoughts??
VPE next @ 25c ps ?

[ronthepom]

VPE next @ 25c ps ?

Hi Strat,

You might be right, or Bow?

[shasta]

Hi Strat,

You might be right, or Bow?

Have a look at the map of the CSG area (Bermuda has posted these before)

RPM, SHG, VPE, BOW are all in the same CSG "highway"...

QGC are collecting the whole set one by one...:rolleyes:

[ronthepom]

Have a look at the map of the CSG area (Bermuda has posted these before)

RPM, SHG, VPE, BOW are all in the same CSG "highway"...

QGC are collecting the whole set one by one...:rolleyes:

Hi Shasta,

yes i picked upon that as well, thats why i said Bow, interesting!

[STRAT]

Hi Strat,

You might be right, or Bow?Hi Ron ,
Yup but at what price? 30cps?

[ronthepom]

Hi Ron ,
Yup but at what price? 30cps?

yeh i think they are worth all of 30cps but have been hammered lately like most will be interesting to see what happens. Bermuda is the boy to ask!

[STRAT]

yeh i think they are worth all of 30cps but have been hammered lately like most will be interesting to see what happens. Bermuda is the boy to ask!I think Bermuda will be very disappointed if QGC come in with offers for VPE and BOW at these levels but I can see it being on the cards. They have timed this all rather well I think.

[bermuda]

I think Bermuda will be very disappointed if QGC come in with offers for VPE and BOW at these levels but I can see it being on the cards. They have timed this all rather well I think.

Hi Strat,
You are surely right. I would be extremely peeved if QGC low balls VPE. I dont mind them having a crack at it but please wait until early next year. Unfortunately QGC wont wait that long so I am hoping that the ODIN boys and JK will demand a price in keeping with a proper valuation/s.

BOW is getting hit as QGC's price drops. We cant have BOW's offer for RPM looking better than heavyweight QGC's offer can we.? I am sure BOW is being manipulated down by all of this.

BOW will really jump after all this is over.

[STRAT]

Hi Strat,
You are surely right. I would be extremely peeved if QGC low balls VPE. I dont mind them having a crack at it but please wait until early next year. Unfortunately QGC wont wait that long so I am hoping that the ODIN boys and JK will demand a price in keeping with a proper valuation/s.

BOW is getting hit as QGC's price drops. We cant have BOW's offer for RPM looking better than heavyweight QGC's offer can we.? I am sure BOW is being manipulated down by all of this.

BOW will really jump after all this is over.I thought that a possibility and have a close eye on BOW.

CUE too. What are your thoughts on that one Bermuda?
( sorry, probably the wrong thread to ask that )

[bermuda]

I thought that a possibility and have a close eye on BOW.

CUE too. What are your thoughts on that one Bermuda?
( sorry, probably the wrong thread to ask that )

Strat, Have a look at my post on the CUE thread .Post no.103 page 7. Still looks okay.

QGC down today so that is going to knock BOW again. Dont mess with Cottee! He's a big boy.

[STRAT]

Strat, Have a look at my post on the CUE thread .Post no.103 page 7. Still looks okay.

QGC down today so that is going to knock BOW again. Dont mess with Cottee! He's a big boy.Thanks , will do

[kiwiwim]

Hi Bermuda
I have tried to find your thread reference "CUE thread .Post no.103 page 7", but I do not get there! Can you give me a tip how to find a thread number?
Hope to see you tomorrow
Wim

[bermuda]

Hi Bermuda
I have tried to find your thread reference "CUE thread .Post no.103 page 7", but I do not get there! Can you give me a tip how to find a thread number?
Hope to see you tomorrow
Wim

Just go to the Cue Energy thread ( about 6 below this )
and click on page 7.

Hope you still have those Arrow shares! What a standout. Davies is good eh?

[Huang Chung]

Been thinking on how well positioned the Queensland junior CSG hopefuls really are......

We all have heard that producing CSG is capital intensive, as unlike conventional gas, many holes need to be sunk etc.

We also know that the focus in Queensland is the export LNG market.

LNG facilities are HUGELY expensive, and will established by the big Oz CSG players and their big brother foreign partners.

Assuming the plan to export their gas, it seems unlikely the junior CSG players would take a stake in the LNG facilities their gas will go through. Presumably, they will be charged a toll to have their gas processed. Alternatively, they might sell their gas at the gate to one of the big boys who will then do the downstream processing. Either way, it would seem that the juniors would not be getting the full market price for their gas.

So it seems to me that the juniors could really get squeezed....high production costs and a lower sales price/processing toll.

Of course, there is always the domestic market where you can avoid the LNG step, but this market is comparatively small.

Does anyone see where I'm coming from with this?

[STRAT]

Does anyone see where I'm coming from with this?Sure HC thats crysal clear and worthy of investigation. BEARing in mind FA is not my thing and I dont do in depth research, Isnt the existing infrastructure in Queensland one of the reasons the specs in this area have an advantage all be it at a cost?

[macduffy]

Originally Posted by Huang Chung
Does anyone see where I'm coming from with this?

I've always thought that the juniors' best hopes lie in JV's with majors, as AOE have with Shell ( although AOE is not, strictly, a junior). The risk/opportunity here is that the junior gets taken over, hopefully at a price that realises a good chunk of its value.

[trackers]

Origin Energy swears by coal gas as net rises 13pc



AS shareholders wait for Origin Energy to select a partner to develop its Queensland coal seam gas reserves, the takeover target yesterday boosted full-year net profit by 13 per cent to a record $517 million on a strong performance from its retail business.The company is forecasting earnings per share growth of at least 10 per cent this financial year, but its outlook will really be shaped by the progress of British gas giant BG Group's $13.65 billion cash bid and Origin's attempts to fend it off by finding a partner for its coal seam gas development.



BG yesterday called a September 16 shareholder meeting in its home town of Reading to get the go-ahead for its hostile bid.
That is just two days before it has to decide whether to extend its offer past September 26.
BG is confident the vote, which requires a majority of acceptances from those participating, will go through.
Origin chief executive Grant King said the the company's current plans remained on track.



"The value of Origin exceeds the bid and embedded in these results is evidence we can deliver on that, so nothing would change. The coal seam gas monetisation process will change the company depending on the outcome, but in terms of belief we can continue to deliver, that stays the same."

http://www.theaustralian.news.com.au/story/0,25197,24258109-643,00.html Also:

http://business.smh.com.au/business/origin-takes-aim-at-brits-with-strong-profit-boost-20080828-450o.html

http://www.theaustralian.news.com.au/story/0,25197,24258115-643,00.html

[Financially dependant]

More interesting options mentioned in this article! If Origin find a new partner then BG need a lot more CSM! QGC are building a large resource;)

http://www.theaustralian.news.com.au/story/0,25197,24258115-5005200,00.html

[The Big Ease]

http://www.abc.net.au/reslib/200808/r287623_1227327.asx

forgot to say, thats a retty good interview with richard cottee on inside business with kohler.

[bermuda]

http://www.abc.net.au/reslib/200808/r287623_1227327.asx

forgot to say, thats a retty good interview with richard cottee on inside business with kohler.


The Big Ease.
Thanks for that. Appreciated.

[macduffy]

Yes, thanks, TBE.
Interesting stuff. I didn't hear anything to make me want to sell my AOE and the market seems to agree, at least so far today.

;)

[AMR]

Wow look at it rise. I looked around on some other forums and a figure of $3.75 per share was being tossed around. A new floor?

On a separate topic, does anyone know of a CSG index fund?

[The Big Ease]

my understanding is that csg acreage doesnt include the actual rights to the coal.
so for csg plays, this doesnt appear to be a big deal.

have i got that right?

[Huang Chung]

QGC seemed to roll over on Friday.....:confused:

[tricha]

Wow look at it rise. I looked around on some other forums and a figure of $3.75 per share was being tossed around. A new floor?

On a separate topic, does anyone know of a CSG index fund?

WELL looks like u have to create your own fund,"The game is back in Play today."

[Huang Chung]

Congratulations to everyone who backed a CSG winner today. QGC's performance was simply amazing.

[The Big Ease]

well, BG walks away or do they?
can they?

[tricha]

well, BG walks away or do they?
can they?


BG pulls out of Origin approach


http://newsimg.bbc.co.uk/media/images/44613000/jpg/_44613081_originenergy226.jpg Origin was keen for help to develop its coal seam gas assets


UK gas producer BG Group has ended its hostile takeover bid for rival Australian energy firm Origin.
It said it would not increase its 13.8bn Australian dollar (£6.3bn; $11.2bn) bid after Origin formed a joint venture with ConocoPhillips.
The US oil giant is to put up to $8bn into a joint venture to develop Origin's coal-seam gas assets and build a liquefied natural gas project.
BG said it could not "justify" increasing the price, after the tie-up.
"The price implied by this newly announced joint venture is higher than BG Group is able to justify," said chief executive Frank Chapman. BG had said in June it would go directly to Origin's shareholders with its all-cash offer after the board rejected a friendly bid of A$15.50 a share in May. The BG offer was at a 48% premium to Origin's closing share price on 29 April, before the move was announced.

[The Big Ease]

i meant walk away from the sector.
this article gives a pretty wrap up about what is driving BG if you read from the middle onwards. they need their gas supply because of their contractual commitments in asia (as bermuda as repeatedly pointed out). qld csg ticks all the boxes and they need it. 9.9% of qgc wont be the end of their equity venture in this sector. its fascinating to watch it unfold, but there is one thing for sure; there is alot of gas and even more demand for it.
http://http://www.theaustralian.news.com.au/story/0,25197,24317627-23850,00.html

[tricha]

Yes, a good bet on QGC, Big Ease. And BOW and VPE (ODN tag along),
Oh what a ride :p



7:14 AM, 10 Sep 2008 [/URL]

Stephen Bartholomeusz

A huge bet on coal seam gas

[URL="http://www.businessspectator.com.au/bs.nsf/Article/The-less-than-magnificent-seven-JBRWZ?OpenDocument&src=spb"]



(javascript:showEmail())


BG Group’s Frank Chapman is a pragmatist. Origin Energy’s remarkable deal with ConocoPhillips on Monday blew his $13.8 billion bid out of the water. Rather than maintaining a pointless pursuit, he has chosen to retreat instantly, which clears the way for the new coal seam gas joint venture to proceed and the debates about value to be refocused from the bid to Origin’s independent worth.

BG’s surrender also removes the most obvious source of an attack on the $28.55 to $30.71 a share valuation of Origin by its independent expert, Grant Samuel. Indeed, BG’s swift and quite gracious departure from the scene adds credibility to the view, reflected in the Grant Samuel numbers, that the deal Origin has struck with ConocoPhillips is a value-transforming one.

The core of Grant Samuel’s analysis was its evaluation of the agreement with ConocoPhillips, which it said valued Origin’s coal seam gas (CSG) business at between $18.70 and $19.49 a share. The valuation of Origin’s other businesses, at between $9.85 and $11.22 a share, was broadly consistent with the market’s numbers.

The Origin deal is the high-water mark in what has been a scramble by the international oil and gas majors to grab a piece of the coal seam gas action in Queensland.

There's BG itself, with its deal with Queensland Gas and bid for Origin, Malaysia’s Petronas, through its joint venture with Santos, Shell through its deal with Arrow Energy (and its reported interest in Origin’s gas) and ConocoPhillips – all have paid previously unimaginable prices to secure CSG resources as feed for planned export LNG plants. BP was also said to be one of the participants in Origin’s CSG "monetisation" process.

The highest prices paid – $1.65 per gigajoule for 3P reserves if two-train LNG plants are built – were achieved by Santos and Origin. That’s rational, given that they have the largest resources.

The intensity of interest from the global oil and gas majors, and the prices they have been willing to pay, validate the view that the Queensland CSG fields are a new resource of global significance. The abruptness with which CSG has gone from being a curiosity to a strategic resource has, however, confounded the local market. Even Santos and Origin appear a little stunned by the values attributed to their resources.

My colleague Alan Kohler (Origin’s dubious valuation (http://www.businessspectator.com.au/bs.nsf/Article/Origins-dubious-valuation-JB7N2?OpenDocument), September 9) appears to share the market’s bemusement/resistance to the notion that it got the Origin number so badly wrong. As he says, Grant Samuel’s valuation is, at the top end, nearly twice the level at which BG bid and nearly three times its pre-bid price. While Origin shares have risen since the deal was announced, they still trade at a 40 per cent discount to the bottom end of the valuation range.

Kohler argues, in effect, that the Grant Samuel valuation may over-state Origin’s value because it assigns the same value to Origin’s 50 per cent interest in the joint venture as it does to ConocoPhillips, whereas he says ConocoPhillips has arguably paid a control premium for its half of the joint venture.

There is nothing in the documentation Origin released on Monday to suggest that is the case. Indeed, Grant Samuel said explicitly that there is nothing in the agreements between the parties that would diminish the value of Origin’s interest relative to ConocoPhillips’.

The joint venture has an exact 50:50 ownership split. While ConocoPhillips will, given its expertise, be operator of the LNG plant, Origin will be the operator for all the gas production and associated infrastructure. LNG produced from as many as four trains will be jointly marketed, while Origin will be responsible for domestic gas sales.

It looks like a genuine and balanced joint venture, with Origin responsible for upstream activities and ConocoPhillips the downstream processing. The only hint of a "poison pill" is that ConocoPhillips has the right, in the event that there is a change of control within Origin, to replace it as operator of the upstream elements of the joint venture.

Origin would, however, still have the right to appoint half the board of the joint venture and to veto decisions or budgets at the joint venture level. The economic benefits of the joint venture look to be shared evenly.

Thus, it would appear that someone could acquire Origin and gain a 50 per cent interest in the CSG resources and the LNG facilities the partners propose building. The issue of a control premium, or the absence of one, doesn’t look to be an issue.

That tends to support the Grant Samuel valuation. If one accepts that the value of the non-CSG assets is roughly in the right ball park, it is quite a straightforward exercise to take the payments ConocoPhillips will make – $6 billion up-front, $1.15 billion for Origin’s share of development costs up to a final investment decision and $600 million for each LNG train that is built – and discount them to produce their net present value.

The conclusions Grant Samuel reached on Origin’s value may bear no relationship with the market’s previous assessments, and may have produced a premium to pre-bid market greater than anything ever seen in this market before – nonetheless, valuing the CSG component of Origin would have been one of the easier tasks Grant Samuel has undertaken.

After a competitive process, one of the world’s biggest energy groups has committed itself to putting simple cash on the table for a half share of the resource and its development potential. That looks as real and as arms-length a mechanism for establishing value as any.

Whether that value holds up over time will, as will be the case with the other CSG partnerships, depend on the eventual economics of building and operating export LNG facilities based on CSG.

Some of the world’s largest companies are, of course, completely disregarding the signals the market has been providing on the value of the CSG-exposed companies and making very, very large bets that it will.

[The Big Ease]

i have highlighted the part that is most reassuring...

After a competitive process, one of the world’s biggest energy groups has committed itself to putting simple cash on the table for a half share of the resource and its development potential. That looks as real and as arms-length a mechanism for establishing value as any.

Whether that value holds up over time will, as will be the case with the other CSG partnerships, depend on the eventual economics of building and operating export LNG facilities based on CSG.

Some of the world’s largest companies are, of course, completely disregarding the signals the market has been providing on the value of the CSG-exposed companies and making very, very large bets that it will.

[/INDENT]

[Huang Chung]

The market seems to think QGC will be BG's next target. I wouldn't be surprised if BG went elsewhere to get their gas....maybe the Qld CSG sector is simply too hot right now......

[The Big Ease]

The market seems to think QGC will be BG's next target. I wouldn't be surprised if BG went elsewhere to get their gas....maybe the Qld CSG sector is simply too hot right now......

like where?

[Huang Chung]

Maybe natural gas rather than CSG?

Maybe another country?

QGC up 30%, and no bid in site....what would they have to offer to take them out????

[Financially dependant]

like where?

What about PNG as an option?

[macduffy]

What about PNG as an option?

Certainly an option, particularly in conjunction with OSH.
I would think though that the Country Risk aspect would lead them to prefer Australia if they can do the right deal.

;)

[The Big Ease]

silly question: what is a train?

[tobo]

From Wikipedia, the free encyclopedia
An LNG train is the term used to describe the liquification and purification facilities in an liquefied natural gas plant.

In order to make it practical and commercially viable to transport natural gas from one country to another, its volume has to be greatly reduced. To obtain maximum volume reduction, the gas has to be liquefied through the application of proprietary refrigeration technology which makes it possible to cool the gas down to approximately -160 °C. This process also requires very strict safety measures and precautions during all liquefaction stages, due to the highly vulnerable and flammable nature of the gas involved.

Since the numerous impurities that are naturally found in the raw gas freeze at low temperatures, and would thus block the cryogenic section of the plant, the gas has to be purified before it can be cooled down to cryogenic temperatures.[1]

Each LNG plant consists of one or more trains to process liquified natural gas. A typical train consists of a compression area, propane condenser area, methane and ethane areas.

[tricha]

How IS this is going to relate to the BOW's and VPE's, it surely must be going to get interesting with BG .
Bermuda, with this being your field of expertise, what do you see BG's next step now they have conceded defeat on Origin.
I take they still need to secure gas for long term contracts.?
Where could this take VPE and BOW to?

Origin's gas spree puts it ahead of the pack



September 13, 2008
By quietly amassing assets in a once-marginal resource, the energy company has stolen its rivals' thunder. Clancy Yeates reports.

CURTIS ISLAND, dotted with banksias and home to dugongs and sea turtles, took centre stage in boardrooms from London to Houston this week.
Just off the coast from Gladstone, Queensland, it is the most likely site for the liquefied natural gas plant springing from Origin's $9.6 billion deal with the US giant ConocoPhillips, announced on Monday.
The area is set to become Australia's next energy export hub, hosting several plants to turn coal-seam gas into LNG, which can be shipped to thirsty global markets.
Origin's record deal includes plans for the biggest coal-seam gas to LNG project so far, putting it at the front of a pack to cash in on the region's potential, even if it does not yet have a final site.
The price offered by ConocoPhillips, a Texan LNG giant, for half of Origin's coal-seam gas assets was not only enough to kill BG Group's offer of $13.8 billion for the whole company. It also bumped up perceived values in the sector.
But if Curtis Island sounds like an obscure place to capture the global market's gaze, the same could be said of the resource at the centre of the hype - coal-seam gas - not to mention Origin itself. Spun out of Boral in February 2000 and listed at just $1.54 a share, Origin flew under the radar of many investors, let alone the big oil companies. But it is now basking in the spotlight as the global energy superpowers swoop on Australia's vast gas reserves.
This week's announcement heralded the biggest plans yet for the sector after a year of prolific deal-making. The Conoco-Origin plant will aim to shift 3.5 million tonnes of gas a year in 2014, and up to 14 million tonnes by about 2020. That the east coast of Australia now uses about 9 million tonnes a year gives an idea of the scale of the venture.
The project not only vindicates Origin's chief executive, Grant King, for rejecting the BG bid, it also proves the value of his "integrated energy" strategy of buying up prime energy reserves as well as power plants and retailers.
But how did Origin quietly amass such valuable assets under the nose of the market, which largely overlooked it until the transactions were too big to ignore? How much of its success can be put down to good fortune, and where will the company go next?
And with corporate enthusiasm showing no signs of abating, can be the coal-seam gas bubble keep inflating?
As King announced the deal with ConocoPhillips to the applause of investors, its share price soared to an all-time high just short of $20. An independent expert valued the company at $28.55 to $30.71 a share - a far cry from its humble beginnings on the market.

KNOWN for his fierce dedication to Origin - his family car's number plates bear the company name - King withstood enormous pressure to fend off BG's hostile bid.
He describes Origin's plans as "transformative". They could also transform his bank balance, and those of other senior Origin executives. King will have the chance to pocket close to $4 million from the takeover ordeal. Under the company's remuneration plan, the BG approach has triggered an option that allows the boss to buy up to 400,000 shares in Origin at the bargain price of $7.330, compared with this week's level of about $17.00.
But alongside the perks of outmanoeuvring an oil giant, Origin's story is about how it managed to get ahead of the curve by backing a once-marginal resource before the boom.
Not long ago the gas lurking in the seams of coalfields was seen by many as a health hazard rather than a fuel in its own right. The gas is methane - and can be used for all the usual purposes - but it has been underexploited because using it commercially requires more complicated drilling.
There is still a long way to go for the resource. One insider describes coal-seam gas fields as "tracts of dirt with pipes, which hardly produce any cash".
In the past, the big end of town was just as nonplussed by Origin.
"Few businesses in Australian financial markets had promised as much as Boral's $2 billion energy division and yet failed so dismally to inspire the investment community," the Herald said in 1999 of what would become Origin.
After floating in 2000, Origin had an usual strategy for an energy company.
While most businesses focused on either "upstream" (exploration and production) or "downstream" (electricity generation and retailing), it set out to do both.
Spurred on by a wave of deregulation and privatisation, it gobbled up a range of assets across the spectrum of retail, resources and generation, and became a target in itself.
The spree - which included a 51.4 per cent stake in New Zealand's Contact Energy in 2004 and the Queensland retailer Sun Energy last year - encouraged the idea that Origin was a "utility" rather than an energy company.
Sceptics of the integrated approach thought it messy and Origin ripe for takeover. This came to the fore last year when AGL proposed merging to create a $14 billion energy powerhouse.
But alongside the utilities business, from the late 1990s King bought up big in coal-seam gas, which, he says, was "at best a cottage industry". In the US, however, the sector was surging, and following this lead Origin soon had the most extensive reserves in the country.

"Unlike conventional hydrocarbon companies, we looked for gas where it was easy to sell, as distinct from where it was easy to find," King says.
It became clear the gamble had paid off when a spate of deal-making in the sector alerted markets to the potential bonanza Origin was sitting on.
Santos bid for Queensland Gas in late 2006 - rejected by the competition watchdog - before AGL bought about a quarter of the gas firm last year.
"When people start paying money for positions, that's what the market pays attention to," King says.
This trickle of deals gave way to a torrent of interest from multinationals attracted by Australia's plentiful supplies of the gas, which they planned to convert into the exportable liquid form LNG.
Coal-seam gas has not been turned into LNG before, but such doubts were outweighed by Australia's proximity to Asian markets. The fuel's lower carbon emissions than coal and record oil prices - which broadly reflect LNG prices - added to the Great Gas Rush.
The culmination was a frenzy of cash-heavy projects early this year. In April BG formed an alliance with Queensland Gas, and took 10 per cent of the company.
The next month the British firm offered $14.70 a share in a friendly play for Origin, compared with its pre-approach price of about $10.00. It appeared generous and Origin came within a whisker of accepting.
In the rough and tumble of the takeover war that followed, BG released a letter marked "strictly private and confidential" from Origin's chairman, Kevin McCann.
Subject to shareholder approval and an independent experts' report, he wrote: "I believe you will acquire a company with outstanding assets and people, an excellent business and … a culture that is akin to that of BG Group."
Two days later, Origin walked away, after evidence their reserves had more than doubled and Santos struck a $2.5 billion agreement to build an LNG plant with Petronas of Malaysia. This deal more than doubled the price coal-seam gas could fetch, setting a new benchmark in the sector.
The takeover target justified its change of heart with a variation of the economist John Maynard Keynes's famous line: "When the facts change, I change my mind."
While Origin invited the world's biggest LNG players to inspect their books - thought to include BP, Shell and Chevron - commodity prices began their latest decline and the sharemarket continued to plummet.
In mid-June BG went hostile with its bid, upping its offer to $15.50 a share, but King and the Origin board stood firm.

What followed vindicates the decision. ConocoPhillips's payment of $9.6 billion for half of Origin's coal-seam gas is miles ahead of BG's $13.8 billion bid for the whole company.
While there would have been nail biting at Origin as BG upped the pressure, the board said "trust us".
Monday's agreement to build an LNG plant of up to four trains (production units) brought a speedy death to the tilt from BG.
"The price implied by this newly announced joint venture is higher than BG Group is able to justify," its chief executive, Frank Chapman, said.
"We wish Origin and ConocoPhillips every success with their joint venture."
BG's failed takeover aside, the whopping price attracted by Origin has encouraged even larger sharemarket bets the gas assets, and the sector, can keep rising.
The Santos and Origin deals both attracted record prices of $1.65 a gigajoule for reserves used in the first two trains of the LNG projects. If all four trains go ahead, Origin will fetch $1.88 a gigajoule.
Prices have soared so much that an independent expert report by Grant Samuel valued Origin at $28.55 to $30.71 a share, about triple its value before the arrival of the offshore giants. Shares in one of its peers, Queensland Gas, rose 30 per cent on news of the ConocoPhillips deal.
ConocoPhillips's visiting executive, John Lowe, put doubts on the value of the resources to bed, and suggested more corporate interest is on the cards.
"There's a very large appetite for LNG. We believe that stable, secure resources like the coal-seam gas out of Australia into LNG are going to be extremely attractive to LNG buyers," he said, adding that his technical team were "giddy" over the resource's size.
The chief executive of the consultancy EnergyQuest, Graeme Bethune, says foreign interest was the logical step, as gas has become more widely traded across borders.
About 15 countries in the world import LNG, but this number will have doubled when all current proposed projects are finished.
"Australia is one of the few places in the Asia Pacific area that has a lot of potential gas resources, and the international players have realised that's not only the case on the west coast, but also the east coast."
But could the expectations create a bubble? If so, the market looks prepared to inflate it.
The managing director of the Origin shareholder Argo Investments, Rob Patterson, rejects the bubble tag by pointing to the international companies lured to Queensland's gas fields.

"When you see the size of the ConocoPhillips deal - since they probably know the business better than anyone else - you take some comfort from that," he says.
But some analysts warn of the growing tide of projects cashing in on the same market, all of which will be vulnerable to oil price changes.
JP Morgan's Mark Greenwood says: "While Asia Pacific LNG markets are currently very tight, we foresee a softening of this market and also the potential for major projects deferrals. For investors it is a case of buyer beware."
As long as the world keeps burning more gas, Australia's companies are set to cash in. Frantic exploration has caused reserves to balloon by 50 per cent since May alone.
And after the latest surge, many are expecting more wheeling and dealing from the oil giants and local players.
One theory is that BG could make a tilt at its partner Queensland Gas or even Santos, which loses its shareholder cap in November. Meanwhile, Shell's $776 million alliance with Arrow to build a smaller plant is regarded as too modest for a company of its stature.
An analyst at Wilson HTM, John Young, said: "The bids this year have indicated that the large international participants in this industry value scale and they value maturity of coal-seam gas assets."
And while the biggest local players have partners for now, building up to five multibillion-dollar LNG plants side by side is expensive and could prompt mergers.
King concedes the arguments for consolidation, but says complex mergers could create delays, threatening speed to market.
"I'd suspect there's more value around effective execution of these projects than there is, perhaps, around co-operation, especially at the LNG plant level," he told the Herald this week.
Origin will have its hands full delivering an ambitious project, but with $6 billion from ConocoPhillips pouring in next month, it will also be open to picking up cheap assets.
Whatever corporate takeover activity or further swoops from oil giants, Queensland's coal-seam gas sector has been propelled onto the energy stage.
Young says recent announcements show it could rival the North West shelf.
"It's going to be a significant LNG production hub for Australia," he said.

[Corporate]

Tricka - thanks for posting at up!

CSG is very exciting. I may have to get some more VPE next week.

[macduffy]

Hi underDog.

Thanks for that - a thought-provoking article. Stephen Bartholomeusz is one of the better financial journalists, IMO.

;)

[The Big Ease]

http://http://www.businessspectator.com.au/bs.nsf/Conversations/Coal-seam-gas-JC8P7?OpenDocument

good convo happening there too, as well as some linked articles.

no, i dont work for them :)

[Lebowski]

http://www.theaustralian.news.com.au/story/0,25197,24380369-5005200,00.html

http://www.theaustralian.news.com.au/story/0,25197,24382835-5005200,00.html

[The Big Ease]

this was at the backend of an article. just goes to show that demand is quite deep from major global players. the doubters tend to be self-interest driven.
The Grant Samuel report reveals that Origin received 22 expressions of interest from a wide range of “credible” international and domestic energy companies in early July 2008. Origin then reduced this to a short list of six, who were invited to conduct detailed due diligence and submit final offers and five final offers were received.

The deal with ConocoPhillips allows for Origin to receive up to $9.6 billion, depending on the number of LNG trains that the joint venture finally commits to.

[Trent]

Shell now has about 14.88% of PES and AOE about 15.4% - i.e. 30+ percent between them. I am picking that both AOE and Shell will increase their holdings to just below the 20% trigger level (they will then have about 40% between them), wait until the market bottoms (days or weeks or months?) and then the t/o offer will come - probably price on the data plus about 30% (my guess) for the remaining 60%. Mathews Capital now gone aparently - sold to Shell - no blocking stake left?

At price of $1.32 plus 30% or $1.73 equates to a MC of about 160million. Based on PES initial target certification of 300pj this equates to about 53cents per GJ - c.f. QGC offer for SHG implied value of 52-72cents per GJ for 3P reserves. Possibly in the right ballpark but then again PES has a very large amount of ground in Queensland not to mention Tasmania.

The market seems oblivious to this but then again, there may something that I'm missing. In any event Shell and AOE will pick up this company for a steal. Once certified (assuming 300Pj) PES should be worth in the order of $360m to $504m based on QGC offer ($1.22 to $1.68 per GJ) not including all its other ground c.f. present market cap of about $122m (at $1.32).

I guess it all makes sense given the enormous potential of PES, given the AOE/Shell relationship/ Shell missed out on Origin?/ etc

I'm picking that small shareholders are really going to lose out on the potential of this great company which the market seems to have largely overlooked. Views welcome.
T

Discl: hold AOE PES
DYOR -my views only

[AMR]

WOW QGC down below $3 today...

A question that no one has bought up so far : Will the fall in crude prices be reflected in lower CSG valuations?

[AMR]

Did something happen to PES today?

[KentBrockman]

There was an interesting documentary tonight on TV7, "World's Best: From The BBC - High Price of Gas". Purpose seemed to be to blame (rightly or wrongly) the Russians for the shortage of gas in the UK. However, it gave an interesting insight in gas supply structures within Europe.

It is now much clearer to me why British Gas is hunting for LNG all over the world.

Interesting viewing; I am sure it will be repeated shortly.

[mark100]

Just posted on the STO thread that STO and WPL are now trading on very attractive multiples.

Both WPL and STO offer exposure to growth in LNG production and prices over the longer term and are highly cash generative at this current point in time.

So in the current market where raising capital is impossible why bother trying to invest in the spec CSG plays? Sure they are nice to trade every now and then but I see most (other than AOE and QGC) having huge problems trying to raise cash in the future and at some stage the majors will pick over the ground and buy the good stuff for not much.

[The Big Ease]

Just posted on the STO thread that STO and WPL are now trading on very attractive multiples.

Both WPL and STO offer exposure to growth in LNG production and prices over the longer term and are highly cash generative at this current point in time.

So in the current market where raising capital is impossible why bother trying to invest in the spec CSG plays? Sure they are nice to trade every now and then but I see most (other than AOE and QGC) having huge problems trying to raise cash in the future and at some stage the majors will pick over the ground and buy the good stuff for not much.

oil should bring the cash for vpe. it also has cash in the bank.
i reckon vpe will be fine for a while yet.

i understand bow is in a similar situation with its oil finds, though with less cash on its books and greater csg exposure.

takeovers are a "risk" in the interim.
there are some outstanding buys at the moment. but few present as much upside as vpe and bow. i guess those invested in both are looking for multiple baggers in the near term ie 6-12 months.

[bermuda]

oil should bring the cash for vpe. it also has cash in the bank.
i reckon vpe will be fine for a while yet.

i understand bow is in a similar situation with its oil finds, though with less cash on its books and greater csg exposure.

takeovers are a "risk" in the interim.
there are some outstanding buys at the moment. but few present as much upside as vpe and bow. i guess those invested in both are looking for multiple baggers in the near term ie 6-12 months.

TBE,
I see BG are in trouble over their investment in Khazakhstan. These guys ( oil and gas producers ) are going to nationalise the hell out of the 'majors' in the next few years.

I wonder what BG will do in Queensland. On the one hand demand is collapsing. On the other they need some big reserves fast.

Oil could go a lot lower. I think the oil producers are about to experience a lot of pain. I dont think we have ever experienced what is coming up.

[shasta]

AOE looking really good

Shell cash now worth $640m! (for 30%) for total cash reserves of $750m vs AOE MC $1.33b because of exchange rate gains

AOE say they are now fully funded till 2011
http://www.asx.com.au/asxpdf/20081016/pdf/31cxq4gz4j10gn.pdf



So with that, I say heads up on PES;), my favourite pure CSG stock

placement at $1.70
AOE buying in last week at $1.40 (approx 4m shares)
PESO Options in the money = another $10m by year end
Nice buy volume spikes on chart

AOE now with 17% of PES


I am expecting a full takeover by year end, and will go by AOEs last large purchase of $1.40 as a guide as they already work together.

Underdog

Check out HC's NHC thread, they own a chunk of AOE (17%?), & sold off some coal permits to the Chinese (now cash = market cap roughly).

It's getting a bit indirect, but is still exposed to the CSG game

[Huang Chung]

Underdog

Check out HC's NHC thread, they own a chunk of AOE (17%?), & sold off some coal permits to the Chinese (now cash = market cap roughly).

It's getting a bit indirect, but is still exposed to the CSG game

Actually Shasta, NHC sold New Saraji to BHP-Mitsubishi Alliance (BMA). Probably sold at the top of the market, so nice for them to be sitting on all that cash.

After tax proceeds will be used for New Acland expansion, 100% owned Queensland Bulk Handling expansion and exploration. They also plan on paying a large dividend to shareholders this time next year.

I wonder if NHC would be considering a tilt at AOE? This pullback in AOE's share price must come as an unexpected surprise, and NHC may wish to capitalise on the situation. I understand that they share a lot of common acreage on the Darling Downs, so there may be synergies through joint exploration, certain infrastructure etc.

Interesting how there's always a bigger fish in the ocean. A chunk of PES is owned by AOE, 18% of which is owned by NHC, about 65% of which is owned by Soul Pattinson (SOL), which has a major cross shareholding with Brickworks (BKW). Interesting stuff.

[mark100]

QGC in a trading halt due to a material transaction. RPM and SHG also in halts because they are already the subject of bids by QGC. Is BG Group now making a play for QGC?

Buying AOE now could be a way of riding any positive news for the sector. I actually bought AOE yesterday

[mark100]

QGC in a trading halt due to a material transaction. RPM and SHG also in halts because they are already the subject of bids by QGC. Is BG Group now making a play for QGC?

Buying AOE now could be a way of riding any positive news for the sector. I actually bought AOE yesterday

AGK who own 25% of QGC are also in a halt pending a material transaction. Maybe AGK are going to have another go at buying QGC or they want to sell their stake...

[Financially dependant]

AGK who own 25% of QGC are also in a halt pending a material transaction. Maybe AGK are going to have another go at buying QGC or they want to sell their stake...

This sector just keeps getting more interesting, just when you think it is safe to go back in the water......

I think we have all been waiting to see what BG group were going to do and maybe QGC predator turned pray???

[upside_umop]

From Australian Weekender..

Credit Suisse said in a September 30 client note that AGL Energy may consider swapping a portion of its Queensland Gas interest for controlling stakes in some of the company’s coal seam gas fields.

[Financially dependant]

A bit more on my theory...

BG set to bid for Queensland Gas

http://www.theaustralian.news.com.au/business/story/0,28124,24545404-643,00.html

Would be ironic if BG puts a low ball offer in for the whole of QGC!:)

[Jess9]

a t/o offer or two and some consolidation might be a nice wee respite for holders of coys in this sector/area right now. Any such bids will hopefully be based on some longer term outlooks and targeted to get larger holders on board i.e. not the RPM $ sort.